Let: (1 ) Pt be the price of one unit of a market basket of goods (i.e., a composite commodity) in year t; (2 ) Pet+1 be the expected price of one unit of a market basket of goods in year t + 1; (3 ) ?et+1 be the expected rate of inflation between period t and t + 1; and (4 ) it be the one-year nominal interest rate. Suppose an individual borrows the equivalent of one unit of a composite
commodity today. Given this information, which of the following expressions represents (i.e., is equal to) the amount of the composite commodity one must repay in one year?
A) (1 + it)(Pet+1)/(Pt)
B) (1 + ?et+1)/(1 + it)
C) {(1 + ?et+1)/(1 + it)} - 1
D) {(1 + it)(Pt)/(Pet+1)} - 1
E) none of the above
A
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The table above shows the total utility from the two goods Freddy likes to consume. If Freddy has consumed 4 fruit drinks and then decides to drink another
A) his total utility will increase. B) the marginal utility from the 5th drink equals 30. C) the marginal utility from the 5th drinks equals 50. D) Both answers A and B are correct.
The Federal Reserve System was created in response to
A) the stock market crash of 1929. B) the ending of the Civil War. C) the banking panic of 1907. D) difficulties of the free-banking era.
When private benefits are less than social benefits, it means that:
A. positive externalities are present in the market. B. positive externalities are not present in the market. C. negative externalities are not present in the market. D. no externality of any kind is present in the market.
Exhibit 2-15 Production possibilities curve
In Exhibit 2-15, the shape of the production possibilities curve demonstrates:
A. changing prices. B. economic growth. C. decreases in resources. D. the law of increasing opportunity costs.