The most desired goods or services that are given up when a choice is made are called the
A. Utility cost.
B. Rationing device.
C. Opportunity cost.
D. Economic profit.
Answer: C
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Suppose that a five-year Treasury bond pays 2.5 percent and a five-year corporate bond pays 8.5 percent, then what is the interest rate spread on this particular corporate bond?
A. 5 percent B. 6 percent C. 7.5 percent D. 9.0 percent
Initially, the nominal rate of interest is 8 percent and inflation is 4 percent. The nominal interest rate then rises to 12 percent and the inflation rate to 8 percent. It follows that the real rate of interest has
a. fallen. b. remained the same. c. risen to 8 percent. d. risen to 10 percent.
The Great Depression of the 1930s
A. confirmed the value of a “hands off” policy for governments. B. was exacerbated by an expansionary monetary policy. C. was a worldwide event. D. continued throughout the 1940s without any interruption.
At this point, potential gains from further tariff reductions worldwide are
A) still very large. B) equal to zero. C) relatively small. D) not worth the cost of negotiations.