Under the expectations hypothesis, bonds of different maturities are assumed to be perfect substitutes because:
A. market forces would always have long-term interest rates equal the average of the current and expected short-term rate.
B. the risk premium is assumed to be negative.
C. expectations of future interest rates are uncertain and therefore cannot be included in the analysis.
D. bond markets are very liquid.
Answer: A
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In which of the following situations might you expect expansionary monetary policy to reduce the unemployment rate?
A) if changes in monetary policy are unanticipated B) if expectations are rational C) if actual inflation is lower than expected D) if actual inflation is higher than expected
If the government regulates the price that a natural monopolist can charge to be equal to the firm's marginal cost, the firm will
a. earn zero profits. b. earn positive profits, causing other firms to enter the industry. c. earn negative profits, causing the firm to exit the industry. d. minimize costs in order to lower the price that it charges.
Since the National Basketball Association is the only significant employer of professional basketball players, it might be referred to as a(n)
A. oligopsony. B. monopsony. C. oligopolist. D. monopoly.
Factors that will tend to lead to higher demand for premium bottled water include all of the following except
A) the popularity of the product with millennials. B) taxes on sodas that cities have been imposing. C) doubts about the benefits of ingredients such as electrolytes which are not found in regular bottled water. D) the possibility of attracting consumers who now prefer energy drinks and sports drinks.