Referring to Figure 18.3, the effect of a decrease in U.S. prices is represented by a movement from point:
A. d to a.
B. b to c.
C. a to d.
D. a to b.
Answer: A
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To obtain a given real rate of return, lenders must charge a ________ nominal interest rate in the face of increasing inflation.
A. higher B. constant C. lower D. deflated
Assume that a traffic ticket attorney is no more productive today than he was 10 years ago but he is now earning 50% more in salary. How do you explain this apparent paradox?
What will be an ideal response?
The intrinsic value of a call option:
A. will be negative if the time value of the option is negative. B. is the difference between the option price and the interest rate. C. is the greater of zero or the difference between the price of the underlying asset and the strike price. D. must be less than or equal to zero.
Scarcity
A. used to be a problem, but is not an issue for modern industrial nations. B. afflicts greedy people only. C. exists in all human societies. D. is a problem for less-developed nations only.