Assume there are no investment projects that will produce an expected rate of return of 8 percent or more. There are, however, $2 billion worth of investment projects with an expected rate of return at 7 percent, an additional $2 billion for every drop of the interest rate by 1 percent. If the real interest rate is 3 percent in this economy, the cumulative amount of investment at the 3 percent or higher rate of return is:
A. $10 billion
B. $8 billion
C. $6 billion
D. $4 billion
A. $10 billion
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The nation has its own MPC. When national income increases from $300 billion to $400 billion, national consumption increases from $300 billion to $360 billion. At Y = $400 billion, the MPC is:
a. 0.2. b. 0.5. c. 0.6. d. 0.67. e. 1.33.
Which of the following is not a necessary characteristic of a successful price discriminator? a. It has market power. b. It can prevent the resale of the product
c. Its marginal costs of production differ across customers. d. Willingness to pay for its product differs across customers.
The effect of an increase in the price level on the aggregate-demand curve is represented by a
a. shift to the right of the aggregate-demand curve. b. shift to the left of the aggregate-demand curve. c. movement to the left along a given aggregate-demand curve. d. movement to the right along a given aggregate-demand curve.
How do ceteris paribus and hypothesis relate in the field of economics?
a. Economists use ceteris paribus to declare that a hypothesis is not constant enough to be a theory. b. Economists use ceteris paribus to declare that a hypothesis has been accepted as a theory. c. Economists use ceteris paribus to test a hypothesis only if the two variables are intangible. d. Economists use ceteris paribus to test a hypothesis with two variables while keeping other variables constant.