Among the people who are characterized below, who has the highest opportunity cost of leisure?
a. a veterinarian who earns $25 per hour and who goes surfing during her leisure time
b. a professional tennis player who earns $50 per hour giving tennis lessons and who watches TV during his leisure time
c. a retail clerk who earns $15 per hour and who plays computer games during his leisure time
d. a CPA who earns $150 per hour and who golfs during her leisure time
d
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A piecework wage compensation may be used if productivity
A) can be related to the supply chain. B) is easy to measure. C) is difficult to observe. D) is backloaded.
When there is an inflationary gap: a. Employment exceeds full employment
b. Employment equals full employment. c. Employment is less than full employment. d. Any of the above is possible.
Suppose that the elasticity of demand for hamburgers is 2.5 and price decreases by 14%. By what percentage will quantity demanded for hamburgers increase?
A. 2.5% B. 5.6% C. 25% D. 35%
Suppose a family is holding $1000 in its checking account for normal transactions, $500 in cash for emergencies, and $1500 as a store of value when the interest rate is 4 percent. If the interest rate rises to 10 percent, which of the following patterns of holding money would be most likely and why?
A. Transactions demand-$800; Precautionary demand-$600; Asset demand-$1500, because people can economize on their money balances for making transactions, but the possibility of an emergency increases with the interest rate. People will also expect rates to go higher, so they will hold money as an asset until the rates increase further. B. Transactions demand-$500; Precautionary demand-$500; Asset demand-$1400, because the opportunity cost of holding money balances has risen. The reduction in money balances held for transaction purposes falls the most because people start using credit cards more when the opportunity cost of holding money increases. C. Transactions demand-$1000; Precautionary demand-$500; Asset demand-$500, because only the asset demand is responsive to changes in the interest rate. D. Transactions demand-$1000; Precautionary demand-$350; Asset demand-$500, because the opportunity cost of holding money has increased. The reduction money balances held as an asset is greatest in dollar terms because interest-bearing assets are much more attractive when interest rates are higher.