A village has five residents, each of whom has an accumulated savings of $50. Each villager can use the money to buy a government bond that pays 10% interest per year or to buy a year-old goat, send it onto the commons to graze, and sell it after one year. The price of the goat that the villager will get at the end of the year depends on the amount of weight it gains while grazing on the commons, which in turn depends on the number of goats sent onto the commons, as shown in the table below. Assume that if a villager is indifferent between buying a bond and buying a goat, the villager will buy a goat. Number of goatson the commonsPrice per 2-yearold goat ($)Income pergoat ($/year)180302752537020465155555 The villagers will buy a year-old goat if the goat can be sold for a price of at
least ________ when it is 2 years old.
A. $65
B. $55
C. $75
D. $70
Answer: B
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If the prices of domestic consumer goods increased while the prices of imported consumer goods decreased, and the demand for each remained the same, which of the following would most likely occur?
a. The GDP price index would decrease while the CPI would increase. b. Both the GDP price index and the CPI would decrease. c. The GDP price index would increase more than the CPI. d. The CPI would increase more than the GDP price index. e. Both the GDP price index and the CPI would increase by the same amount.
A ____________ is a gamble in which the expected value of the gamble is equal to 0.
Fill in the blank(s) with the appropriate word(s).
Demand-pull inflation can develop when
A. Inventories shrink and consumers bid up prices. B. Undesired investment occurs. C. There is a surplus of resources and so wages are bid up by employers. D. There is a shortage of investment and investors bid up interest rates.
The demand for a good is inelastic. Which of the following would be an explanation for this?
A. The good costs a large portion of one's total income. B. The good is a necessity. C. The time interval considered is long. D. The good is specifically defined.