Little Percy lives in two periods. His earnings in the present are 150; in the future he will earn 10% more than today. The interest rate is 5 percent. If his consumption today is 160, what is the most he can consume in the future?
What will be an ideal response?
Lifetime earnings must equal lifetime consumption; therefore, 150 + (150 * 1.10)/1.05 = 160 +
(c/1.05) = 154.5.
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Which of the following is true of import tariffs and quotas?
a. They benefit domestic producers. b. Domestic consumers gain because they purchase the output of domestic firms. c. Specialization and comparative advantage are advanced by tariffs and quotas. d. They tend to expand the volume of world trade. e. Because they increase the output levels of domestic firms, they tend to lower domestic prices.
The real wealth effect explains that higher prices
a. make people worse off by reducing the value of their wealth, leading them to save more and spend less b. make people worse off by reducing the value of their wealth, leading them to save less and spend more c. make people better off by increasing the value of their wealth, leading them to save less and spend more d. increase borrowing, leading to higher interest rates and less investment e. make domestic goods relatively more expensive, increasing the demand for domestic goods and decreasing the demand for foreign goods
When a union successfully raises the wages of its members, it will also
a. increase total productivity, which must rise in proportion to the wage rate. b. encourage employers to find a substitute for the union labor. c. raise the wages of nonunion workers. d. increase the share of income allocated to labor as opposed to capital.
The stimulus policy drew immediate criticism,
What will be an ideal response?