The weighted average of a firm's expected return on its stock and the interest rate that it pays for debt is known as the:
A) internal rate of return.
B) opportunity cost of capital.
C) risk-free rate of return.
D) company cost of capital.
D
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The self-correcting tendency of the economy means that falling inflation eventually eliminates:
A. exogenous spending. B. recessionary gaps. C. expansionary gaps. D. unemployment.
Suppose that your public library charges a fixed monthly membership fee of $12. Members are allowed to check out as many books as they want under this plan. The average member checks out 4 books per month
Suppose that your public library changes its policy. Now each book costs $3 to check out but there is no longer a monthly membership fee. What effect do you think the new policy will have on the total number of books checked out from your library each month? The new policy is likely to ______the number of books checked out because ________. A) leave unchanged; members have already shown that they are willing to pay $12 to check out 4 books per month B) leave unchanged; the average cost of the library service is the same under both plans C) reduce; the marginal benefit of checking out books is now lower under the new policy D) reduce; the marginal cost of checking out books is now higher under the new policy E) increase; the average benefit of checking out more than 4 books is now higher under the new policy
When the Fed buys federal government securities on the open market from commercial banks, then, over time, the:
a. assets of these banks fall. b. assets of the banks stay the same. c. assets of the banks rise. d. liabilities of the bank rise. e. liabilities of the bank fall.
As the outstanding debt of a nation becomes very large relative to the size of the economy,
a. the borrowing cost of the government will decline. b. lenders will have no choice but to hold the outstanding bonds and to buy the new ones as they are offered. c. a country like the United States will have no choice but to default on the payments to bond holders. d. if the country has a central bank, it will almost certainly resort to money creation to service the debt rather than directly default.