Ron regularly deposits $200 each week into a savings account, which earns 3% interest per year. This month he decides instead to invest $200 into the stock market. What is the opportunity cost of Ron's decision to invest rather than save?
A) $200
B) The 3% interest he could have earned by depositing another $200 into his savings account
C) The difference between the rate of return he enjoys in the stock market and the 3% interest return he could have earned by depositing that $200 into his savings account
D) Zero, because Ron already had the $200
B
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Other things the same, the real exchange rate between American and French goods would be lower if
a. prices of French goods were higher, or the number of euros a dollar purchased was higher. b. prices of French goods were higher, or the number of euros a dollar purchased was lower. c. prices of French goods were lower, or the number of euros a dollar purchased was higher. d. prices of French goods were lower, or the number of euros a dollar purchased was lower.
If individual A has comparative advantage in painting and individual B has comparative advantage in carpentry, then
A. specialization will not occur, since each does not have a clear absolute advantage. B. individual B will specialize in painting. C. there is a lower opportunity cost (expressed in units of carpentry) for individual A to paint than for individual B to paint. D. individual A must use fewer hours to paint a fence than individual B.
If you use $1,000 to purchase silver coins, which you plan to keep in a safe, you are using money as
A. a store of value. B. bank reserves. C. a medium of exchange. D. a unit of account.
In new Keynesian theory, the pattern of inflation exhibited by an economy with growing aggregate demand known as inflation dynamics is
A) initially sluggish upward adjustment of the price level and inflation in response to higher aggregate demand followed by higher inflation in the future. B) initially sluggish downward adjustment of the price level and inflation in response to higher aggregate demand followed by lower inflation in the future. C) initially speedy upward adjustment of the price level and inflation in response to higher aggregate demand followed by lower inflation in the future. D) initially speedy upward adjustment of the price level and inflation in response to higher aggregate demand followed by higher inflation in the future.