The wealth effect is another term for the
A) the interest rate effect. B) the real-balance effect.
C) substitution effect. D) the indirect effect.
B
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Imagine that you borrow $1,000 for one year and at the end of the year you repay the $1,000 plus $100 of interest. If the inflation rate was 7%, what was the real interest rate you paid?
A) 17 percent B) 10 percent C) 7 percent D) 3 percent
Banks engage in regulatory arbitrage by
A) keeping high-risk assets on their books while removing low-risk assets with the same capital requirement. B) keeping low-risk assets on their books while removing high-risk assets with the same capital requirement. C) hiding risky assets from regulators. D) buying risky assets from arbitragers.
A Swiss watch company advertises its history of superior craftsmanship. The company thinks that this would
a. Make the demand for the product less elastic b. Make the customers less sensitive to the price c. Assist them with differentiating their product d. All of the above
Which of the following is FALSE?
A) Economies of scale may be internal, external, or both. B) With internal economies of scale, the gains from trade include a wider selection of consumer choices and lower prices. C) With external economies of scale, the gains from trade are less certain since, in theory, they can lock in production in a less efficient country and prevent the development of production in a more efficient country. D) Internal economies of scale lead firms to regionally concentrate their industry.