The opportunity cost of holding money is:
A. heavy and awkward.
B. the probability of theft or loss.
C. the ease of conducting everyday business.
D. the return that could have been earned from holding wealth in other assets.
Answer: D
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Suppose the quantity of bonds demanded exceeds the quantity supplied at a given interest rate. What will happen to restore equilibrium?
a. Bond prices will increase and the interest rate will rise. b. Bond prices will decrease and the interest rate will fall. c. Bond prices will increase and the interest rate will fall. d. Bond prices will decrease and the interest rate will rise. e. Bond prices will increase and the interest rate will stay the same, as bond prices are independent of the interest rate.
Which of the following is an example of the precautionary motive for saving?
A. Every month, Chris puts $400 into his saving account so that he can buy a new car in a few years. B. Pat puts $400 per month in his 401(k) retirement account. C. Gerry and Terry put $2,000,000 in a trust fund that will go to their children when the parents die. D. Jordan sets aside $200 per month in case she has to pay for a new roof for her house.
Most of Europe has relatively ________ inequality, and much of Latin America and southern Africa has relatively ________ inequality.
A. high; high B. low; high C. low; low D. high; low
The wealth effect explains the:
A. positive relationship that exists between consumer spending and overall price level. B. negative relationship that exists between consumer spending and overall asset valuation. C. positive relationship that exists between consumer spending and overall asset valuation. D. negative relationship that exists between consumer spending and overall price level.