Current income is 300, expected future income is 363, and the interest rate is 10%. If income rises by $63 in each period, so Y(1) = 363 and Y(2) = 426, then in each period consumption
a) also rises by $63
b) becomes 390
c) rises by $56.7, or 90% of $63
d) remains constant
e) rises by $126
a) also rises by $63
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Assume that Y is normally distributed N(μ, σ2). To find Pr(c1 ≤ Y ≤ c2), where c1 < c2 and di = , you need to calculate Pr(d1 ≤ Z ≤ d2) =
A) Φ(d2) - Φ(d1) B) Φ(1.96) - Φ(1.96) C) Φ(d2) - (1 - Φ(d1)) D) 1 - (Φ(d2) - Φ(d1))
Which of the following is not true?
A. George H.W. Bush won reelection after agreeing to a small tax increase as part of a political compromise. B. George W. Bush won election after claiming tax cuts would pay for themselves. C. Ronald Reagan claimed tax cuts would spur economic gains that would increase tax revenues before the tax cuts led to significantly lower revenues. D. After Bill Clinton raised taxes on upper income individuals to reduce federal budget deficits his party lost heavily in the following congressional elections.
All of the following are true concerning the flexible exchange rate system except one. Which is the exception?
a. It is the same as a floating exchange rate system. b. It is a system in which supply and demand determine the exchange rate. c. Government officials have little direct role in the foreign exchange market. d. Exchange rates may fluctuate considerably from time to time. e. Exchange rates are fixed by the central banks of the various countries.
Suppose that U.S. prices rise 4 percent over the next year while prices in Mexico rise 6 percent. According to the purchasing power parity theory of exchange rates, which of the following should happen?
A. The dollar will be worth 1.5 pesos in the foreign exchange market. B. The peso will be worth 1.5 dollars in the foreign exchange market. C. The dollar will depreciate. D. The peso will depreciate.