When a teacher in a private school points out to her high school principal that since there are empty seats in all classrooms, the cost of additional students is really zero, she is using the
a. law of comparative advantage.
b. principle of marginal analysis.
c. theory of externalities.
d. notion of the cost decreases of the service sector.
e. concept of opportunity cost.
b
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In the money market, if the interest rate exceeds the equilibrium interest, there is a surplus of money. How is the surplus eliminated?
A) People buy bonds to rid themselves of the surplus money, bidding up their price and pushing interest rates down. B) Banks will lend out the surplus, lowering interest rates. C) The Federal Reserve will destroy currency, reducing the quantity of money. D) The high interest rate increases the demand for money, eliminating the surplus.
Default risk
A) is the probability that a borrower will not pay in full the promised coupon or principal. B) exists only for the bonds of small corporations. C) is also known as market risk. D) is zero for bonds issued by cities and states.
Refer to the above figure. Assume that only two goods can be produced in the economy. Which of the following statements is TRUE?
A) Points a, b, and c are all obtainable points of production. B) Points a and b are obtainable points of production. C) Points b and c are obtainable points of production. D) Only point b is an obtainable and efficient point of production.
A movement along a consumption function is caused by:
a. a change in households' real assets. b. a change in interest rates. c. changes in taxation policy. d. expectations of price changes. e. changes in households' disposable incomes.