Your favorite uncle advises you to purchase long-term bonds because their interest rate is 10%. Should you follow his advice?
What will be an ideal response?
It depends on where you think interest rates are headed in the future. If you think interest rates will be going up, you should not follow your uncle's advice because you would then have to discount your bond if you needed to sell it before the maturity date. Long-term bonds have a greater interest-rate risk.
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The quantity effect of a price reduction causes:
A) a decrease in revenue because of a lower price. B) an increase in revenue because of increased sales. C) an increase in labor demand due to increased sales of the product. D) a decrease in labor demand because of a lower price of the final product.
"The price of digital cameras fell because of improvements in production technology. As a result, the demand for non-digital cameras decreased
This caused the price of non-digital cameras to fall; as the price of non-digital cameras fell the demand for non-digital cameras decreased even further." Evaluate this statement. A) The statement is false because digital camera producers would not reduce their prices as a result of improvements in technology; doing so would reduce their profits. B) The statement is false because the demand for non-digital cameras would increase as the price of digital cameras fell. C) The statement is false. A decrease in the price of digital cameras would decrease the demand for non-digital cameras, but a decrease in the price of non-digital cameras would not cause the demand for non-digital cameras to decrease. D) The statement is false because it confuses the law of demand with the law of supply.
Capital goods are
A. publicly provided. B. excluded from GDP. C. long-lived goods used for producing other goods and services. D. the end products of production.
An inferior good is one for which
A. demand increases as income increases. B. the demand curve is vertical. C. demand decreases as income increases. D. the demand curve slopes up.