Sanford wants to start up his own business, and needs $50,000 to get it off the ground. He can either withdraw it from his savings account, where he currently earns 2 percent, or he can take out a loan for $50,000 and pay 2 percent interest. Sanford should compare:
A. the explicit cost of $1,000 to the implicit cost of $1,000 and realize it will cost the same whether he borrows it or uses his savings for the venture.
B. the implicit cost of $51,000 to the explicit cost of $1,000 and choose to borrow the money.
C. the explicit cost of $1,000 to the implicit cost of $51,000 and choose to borrow the money.
D. the implicit cost of $1,000 to the explicit cost of $51,000 and choose to use his savings.
Answer: A
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If the inflation rate is negative, the price level in an economy is
A) falling. B) rising slowly. C) constant. D) rising rapidly.
You are better off choosing $400 in 4 years rather than $300 today if the interest rate is
a. lower than about 5.5 percent. b. higher than about 5.5 percent. c. lower than about 7.5 percent. d. higher than about 7.5 percent.
In the short run, how does Fed open market purchases affect interest rates?
A. increases B. decreases C. doesn't change
Marginal product is:
A. the increase in total output attributable to the employment of one more worker. B. the increase in total revenue attributable to the employment of one more worker. C. the increase in total cost attributable to the employment of one more worker. D. total product divided by the number of workers employed.