Suppose that real interest rates increase. What would be the likely effect on household consumption and saving?
What will be an ideal response?
A rise in real interest rates would raise the price of borrowing for households, so consumption would likely decline, especially consumption of products usually bought on credit such as homes and automobiles. A rise in interest rates increases the rate of return earned on savings, making saving more attractive, so savings would likely increase.
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A price ceiling in the market for gasoline that is below the equilibrium price will lead to
A) the quantity demanded of gasoline exceeding the quantity supplied. B) an increase in the demand for gasoline. C) a decrease in the supply of gasoline. D) the quantity supplied of gasoline exceeding the quantity demanded. E) no change in the market since the price ceiling is below the equilibrium price.
Mike, Joe, and Sam are roommates. They need lamps for their common living room. Lamps in their living room are a public good for these roommates
The marginal benefit that each individual receives from varying numbers of lamps in the living room is given in the table above. If the marginal cost of a lamp is 13, what is the efficient number of lamps for the roommates to purchase? A) 2 B) 5 C) 0 D) 1
All of the following arguments are made against inflation targeting EXCEPT
A) rigid numerical targets would diminish the flexibility of monetary policy. B) the Fed would need to depend on future forecasts of inflation since monetary policy acts with a lag. C) the Fed has little influence on inflation. D) Holding the Fed accountable for low inflation may make it difficult for elected officials to monitor whether the Fed is supporting good overall economic policy.
Refer to the data provided in Table 11.3 below to answer the following question(s). Table 11.3ProjectTotal InvestmentExpected Rate of Return(dollars) (percentage)New computer for sales staff $250,00011Remodel for distribution center$200,000 9On-site day care center $100,000 5Employee fitness center$50,000 4Refer to Table 11.3. If the interest rate is 14%, Blackstar Drone Manufacturing should
A. fund all of the projects. B. fund only the purchase of new computers for its sales staff. C. fund the remodeling of the distribution center and the on-site day care center. D. not fund any of the projects.