Explain how a price floor set above the equilibrium market price for a good can cause a surplus of that good
What will be an ideal response?
At the market equilibrium price, the quantity demanded equals the quantity supplied. If a price floor is set above the equilibrium price, the price floor has two separate effects and both help create a surplus of the good. First, the higher price increases the quantity supplied. Second, the higher price decreases the quantity demanded. On both counts—the increase in the quantity supplied and the decrease in the quantity supplied—a surplus is created.
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What are the four main sources of comparative advantage? Briefly explain each source and provide examples
What will be an ideal response?
Suppose a new employee is promised a pension payment of $8000 in the twenty-fourth year after joining the firm. The current pension contribution of $1200 a year. Assuming an eight percent rate of return, this pension plan is said to be
A) fully funded. B) partly funded. C) unfunded. D) fully vested.
Refer to Figure 10.5. A shift from MP1 to MP2 will occur if
A) the Fed decreases its target for the short-term nominal interest rate. B) the term structure effect increases. C) the default-risk premium decreases. D) the expected inflation rate increases.
Which of the following is FALSE?
A) Capital flows today are larger mainly because economies are larger. B) The last two decades are the first time in history that a nation has borrowed more than 10 percent of its GDP. C) There are important qualitative differences between capital flows today and in the past. D) Today most international financial transactions involve buying and selling assets denominated in foreign currencies.