Which of the following is an effect on a borrowing nation if the real interest rate on its loans rises?
A. There will be a higher incentive to default
B. A default is more acceptable to the foreign lenders
C. The fixed costs of nonrepayment can increase
D. A default imposes a smaller penalty on the borrower
Answer: A
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Real demand for money is positively related to the level of real income in the economy
Indicate whether the statement is true or false
If a manager has determined that a particular piece of capital is likely to increase the cash flow of a business by $10,000 for the next five years, what is the present value of the capital at an interest rate of 10 percent? (Assume that the cash flow first increases one year from today.)
When demand is inelastic, an increase in price will cause
a. an increase in total revenue. b. a decrease in total revenue. c. no change in total revenue but an increase in quantity demanded. d. no change in total revenue but a decrease in quantity demanded.
Suppose the price of soda is $2 each and the price of a pizza slice is $4 each. Jean maximizes utility and buys only sodas and slices of pizza. If the price of a soda increases to $3 each, Jean's marginal utility per soda
A) will increase and she'll buy more soda. B) will decrease and she'll buy fewer sodas. C) will decrease and she'll buy more pizza. D) Both B and C are correct.