What is the internal rate of return on a new $2,000 heater that would reduce your heating costs by $200 a year forever? Under what conditions would you make the purchase?
What will be an ideal response?
The internal rate of return is 200/2,000 = 10%. The purchase should be made as long as the interest rate is less than 10%.
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What are the defining features of monetarist macroeconomics and what policies do monetarist macroeconomists recommend?
What will be an ideal response?
Which of the following would be a consequence of substitution bias in the CPI?
A) Judges would award child support payments that would not adequately keep up with the true cost of inflation. B) Businesses would overcompensate employees for inflation when giving cost of living raises. C) Social Security payments would not adequately compensate retired workers for inflation. D) The inflation rate based on the CPI would underestimate the true level of inflation.
Which of the following is not a responsibility of the Fed?
A) supervising member banks B) serving as the lender of last resort C) determining the level of government spending D) providing check-clearing services E) supplying the economy with Federal Reserve Notes
Which of the following does not correctly characterize modern economic growth?
A. It spread slowly across the globe, with some societies not having experienced it yet B. It has occurred only in the last 200 or so years C. It drastically alters the culture and politics of society D. It has not affected the average lifespan of human beings