Refer to the above graph. The selection of which point on the production possibilities curve is most like to result in the largest increase in economic growth over time?
A. A
B. B
C. C
D. DÂ
Answer: A
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Many people who hold bonds
a. think they are poorer than they really are b. end up oversaving because of the paradox of thrift c. end up underconsuming d. mistakenly view the bonds as their personal assets and as the government's liabilities e. believe that the source of the interest they receive is the taxes they don't need to pay
Suppose we were analyzing the pound per Swiss franc foreign exchange market. If Switzerland's interest rate rises relative to England and nothing else changes, then the:
a. The supply of Swiss francs in the foreign exchange market falls, and the demand for Swiss francs in the foreign exchange market rises, causing an appreciation of the Swiss franc. b. The supply of Swiss francs in the foreign exchange market falls, and the demand for Swiss francs in the foreign exchange market falls, causing an uncertain change in the value of the Swiss franc. c. The supply of Swiss francs in the foreign exchange market rises, and the demand for Swiss francs in the foreign exchange market falls, causing a depreciation of the Swiss franc. d. Neither supply nor demand in the foreign exchange market change because relative international prices influence trade flows and not the exchange rate. e. The supply of Swiss francs in the foreign exchange market rises, and the demand for Swiss francs in the foreign exchange market falls, causing an appreciation of the Swiss franc.
Interest-rate swaps are:
A. agreements involving swapping of option contracts. B. exchanges of equity securities for debt securities. C. agreements between two parties to exchange periodic interest-rate payments over some future period. D. agreements that allow both parties to convert floating interest rates to fixed interest rates.
You work as a forecaster for a luxury automobile manufacturer. You know that there is a strong positive relationship between the demand for luxury automobiles and income levels. The government issues a report predicting that it expects income levels to increase steadily over the next 5 years. All else equal, which of the following courses of action would you recommend to the firm?
A. Start to increase investment now so that when income levels increases and the demand for luxury automobiles increases, the firm will be able to meet the new demand. B. Don't change the amount of investment made, but raise the price of luxury automobiles in response to the expected increase in the demand. C. Suggest that the firm curtail its advertising to avert a substantial increase in demand for luxury automobiles. D. Suggest that the firm make an investment in new capital to produce luxury automobiles only after it can verify an increase in income levels.