Which of the two bonds in each example would you expect to generally pay the higher interest rate? Explain why
a. a U.S. government bond or a Venezuelan government bond
b. a U.S. government bond or a municipal bond with the same term and issued by a creditworthy municipality.
c. a 6-month Treasury bill or a 20-year Treasury bond
d. a Microsoft bond or a bond issued by a new recording company
a. The Venezuelan government bond would likely pay a higher interest rate because the market perceives a higher level of risk for the Venezuelan bond relative to the U.S. bond.
b. Because of the tax advantages of municipal bonds, the U.S. government bond would likely pay the higher interest rate.
c. The 20-year bond would likely pay a higher interest rate than would the 6-month bill. The future is uncertain and therefore more risky for a 20-year bond than for a 6-month bill.
d. Since Microsoft is less likely to default than a new and unknown company, the interest on the bond of the new company is likely to be higher.
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Which of the following is likely to cause flour mills to increase their demand for labor?
A) A decrease in the wage rate B) An increase in the wage rate C) An increase in the price of bread D) A decrease in the price of flour products
Scarcity reflects our inability to satisfy wants due to:
A. inefficient political systems. B. limited resources. C. unemployed workers. D. unlimited resources.
Firms may react to a payroll tax by
A. hiring more labor. B. reducing their output. C. shifting to less capital intensive techniques. D. substituting labor for capital.
In 1981, the Fed
A) publicly announced an inflation reduction policy and created a recession. B) took no action so that the inflation rate skyrocketed. C) created an unexpected inflation reduction policy and created a recession. D) created an unexpected inflation reduction policy and created an expansion. E) publicly announced an inflation reduction policy and created an expansion. The figure above shows some Phillips curves for an economy.