Sharon works for a company that provides a 2% match if she puts 6% of her income into a 401(k) retirement account. What will this investment model mean for her future retirement income?
a. Because this investment is made in pretax dollars, Sharon’s current taxable income will be lower.
b. Her taxable income will be higher now, but she will be eligible for 401(k) tax breaks when she retires.
c. Because this investment is made in pretax dollars, her retirement account will earn more money for the future.
d. Because of the company match, Sharon will need to roll her 401(k) over into an IRA before retirement to take advantage of any tax benefit.
c. Because this investment is made in pretax dollars, her retirement account will earn more money for the future.
By not taxing savings in the present, the effect of an IRA or a 401(k) is to increase the return to saving in these accounts.
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Think of the interest rate as the "price" of a home loan. Other things constant, if people expect interest rates to rise significantly over the next couple months, their willingness to purchase a home financed by a mortgage today will tend to
A) rise. B) fall. C) remain unchanged. D) do any of the above because home purchase decisions are independent of interest rates on mortgages.
If a farmer produces 1000 bushels of corn using ten acres of land and one tractor and is able to produce 2000 bushels of corn using twenty acres of land and one tractor, the farmer has
A) increasing returns to scale. B) constant returns to scale. C) decreasing returns to scale. D) no returns to scale.
Federal Reserve Bank Notes become currency when they are
a. actually printed b. delivered, after being printed, to the District Federal Reserve Banks c. transferred from the District Federal Reserve Banks to member banks d. converted by member banks into demand deposits e. used by banks as loans
If an economy moves from a point inside the production possibilities curve to a point on the curve:
A. There is increased use of the productive capacity. B. The level of unemployment has increased. C. The available resources must have increased. D. The level of technology must have increased.