Suppose the interest rate is 7 percent. Consider four payment options: Option A: $500 today. Option B: $550 one year from today. Option C: $575 two years from today. Option D: $600 three years from today. Which of the payments has the lowest present value today?
a. Option A
b. Option B
c. Option C
d. Option D
d
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If the nominal interest rate for Treasury bonds is 8% and the risk-free rate is 3%, the expected inflation rate must be:
a. 3% nominal interest b. 5% for Treasury bonds c. 11% d. cannot be determined without additional information
Each of the Reserve Banks has a president who is:
A. appointed by the bank's board of directors but approved by the board of governors. B. appointed by the board of governors but approved by the bank's board of directors. C. selected from the Board of Directors. D. elected by the commercial banks in their district.
A state lottery has a Million Dollar Lottery game that pays $1,000 a week for life. Assuming a 6% nominal rate of interest and generously assuming an infinite lifetime, can this game be called a "Million Dollar Lottery"?
What will be an ideal response?
An increase in the employment tax should have a relatively small effect on output if the labor supply curve
A) is perfectly horizontal. B) has a positive slope. C) is relatively flat. D) is relatively stee