Which core principle(s) could you use to explain why credit card issuers charge such high rates of interest?
What will be an ideal response?
You could explain the high rates of interest from three principles. First, risk requires compensation, and certainly the credit card issuers are taking a risk when they let people use the cards. There is a risk that some users may not repay the credit card company. Second, you can also justify it from the principle that time has value. The borrowers are using the issuer's funds, and the issuer needs to be compensated for letting the borrower use these funds. Some borrowers do not repay for considerable periods of time. Third, you could also invoke the principle that people use information in making their decisions. Credit card issuers need to acquire information on each applicant before a card is issued and this process is costly. Unfortunately, the applicants who are denied do not get the card, but those who are approved must help cover the information costs.
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The number one cause of death in the United States in 1980 was
a. AIDS. b. heart disease. c. cancer. d. stroke. e. homicide and accidents.
Most of the migration in the world involves people who are moving from countries with relatively ____ GDP per capita to countries with relatively _____ GDP per capita.
a. high; low b. low; low c. low; high d. high; high
The term "underemployed" is used to describe an individual who: a. prefers full-time employment but works only part time
b. has given up looking for a job because he is discouraged about his prospects. c. is jobless because of the seasonal nature of his job. d. is jobless due to a recession in the economy.
Up to what amount would a risk-neutral gambler pay to enter a game where on the flip of a fair coin, if you call the correct outcome the payoff is $2,000?
A. Up to $2,000. B. Up to $1,000. C. More than $1000 but less than $2000. D. More than $1,500.