"Banks make a profit by paying depositors a high rate to attract funds and making loans at a low rate to encourage borrowing." Is the previous statement correct or not?
What will be an ideal response?
The statement is incorrect. Banks make a profit if the interest rate they collect on the loans they make exceeds the interest rate they must pay on the deposits they attract.
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The supply of labor
a. varies inversely with the price level b. does not vary with the real wage rate c. does not vary with the price level d. varies directly with the price level e. varies inversely with the nominal wage rate
Lulu consumes only candy and cookies; she is currently buying more cookies than candy with her limited income. The last bag of candy gave Lulu the same additional utility as the last bag of cookies, and the prices of candy and cookies are the same. Lulu
A. is maximizing satisfaction given a limited income because the marginal utility per dollar is the same for candy and cookies. B. is maximizing utility given a limited income because the prices of candy and cookies are the same. C. could get more satisfaction from the same income by buying more candy and less cookies. D. could get more satisfaction from the same income by buying more cookies and less candy.
When investors follow a "herd instinct," they make decisions:
A. based on the sound logic of a group, rather than the individual. B. based on emotion, not objective information. C. based on hearsay, not objective information. D. as a group, inflating the prices of goods somewhat arbitrarily.
If the favorable supply shocks of the 1990s were reversed in the future, we should expect a(n)
A. increase in inflation and unemployment. B. decrease in inflation and unemployment. C. increase in inflation and a decrease in unemployment. D. decrease in inflation and an increase in unemployment.