Assume the retiree had a third option: receive a lump sum of $750,000 five years from now. If the interest rate is 4 percent, approximately how much is the future $750,000 to be received in 5 years worth today?
A) $586,445 B) $616,445 C) $630,000 D) $646,555
Scenario 12.1: Jennifer has decided to give up her pack-a-day smoking habit and invest the money she would have spent on cigarettes in a retirement account. At $6.00 a pack, Jennifer is currently spending $2,190 per year on cigarettes. Jennifer is 25 years old and plans to retire in 35 years, at age 60. She has chosen a retirement account that will earn a long-term average return of 5 percent per year. Jennifer is currently earning $40,000 annually. Assume that the average annual inflation rate will be 5 percent per year, that the cost of cigarettes will increase with inflation, and that Jennifer's income will also rise with the inflation rate.
B
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Which of the following is not an example of an adverse selection problem?
a. A homeowner purchases a refrigerator that the seller knows has a history of leaking. b. A highly productive worker quits her job after a salary cut knowing that she can make more at a different job. c. A major league baseball player performs poorly in his second season after signing a multi-million dollar contract. d. A contractor uses low quality materials for construction but charges for higher quality materials.
A falling interest rate affects the demand for consumer __________ and shifts the AD curve to the __________
A) nondurables; right B) nondurables; left C) durables; right D) durables; left
The president wishes not only to increase spending for education by $4 billion but also to maintain a balanced budget. Therefore, taxes will also be increased by $4 billion. What will happen to GDP?
A. It will increase. B. It will remain the same. C. It will decrease. D. It’s impossible to know without the multiplier.
The data collected by the Bureau of Labor Statistics have been criticized because
A. part-time workers are not counted in the number of workers employed. B. discouraged workers are treated as part of the labor force. C. some workers who are not looking for work are included in the labor force. D. millions of people with make-work jobs are counted as employed.