Why is the interest rate on U.S. Treasury securities lower than on other types of bonds?
What will be an ideal response?
The U.S. government is a low-risk borrower. By possessing the power to tax, the government can tap the wealth of the U.S. economy to pay back any bonds it sells. Thus few people doubt that the government will be able to repay its debt (despite the slight downgrading of U.S. debt by S&P that occurred in the summer of 2011). According to the risk-return principle, lower-risk investments will produce a lower rate of return (lower interest rate).
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Define frictional unemployment, structural unemployment, and cyclical unemployment. Give examples of each type of unemployment
What will be an ideal response?
Refer to Figure 12-2. Why is the total revenue curve a ray from the origin?
A) because the firm can sell its product at a constant price B) because revenue increases at a decreasing rate C) because the firm must lower its price to sell more D) because revenue increases at an increasing rate
When a second firm enters a monopolist's market,
A. market price will rise. B. the quantity produced by the first firm will increase. C. the first firm's profits will decrease. D. All of these will occur.
By restricting foreign lending, a country with sufficient market power can
A. increase world production. B. lower world interest rates. C. bid up the rate that foreign borrowers have to pay. D. bid up the rate that domestic lenders get after taxes.