As default risk decreases, the expected return on corporate bonds ________, and the return becomes ________ uncertain, everything else held constant
A) increases; less
B) increases; more
C) decreases; less
D) decreases; more
A
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Why do permanent tax cuts have a greater impact on consumption than temporary tax cuts?
a. Permanent tax cuts have a greater effect on expected long-run inflation. b. Permanent tax cuts are perceived as minor while temporary tax cuts are larger and more effective. c. Permanent tax cuts cause movement along the consumption function, while temporary tax cuts shift the consumption function. d. Permanent tax cuts affect expectations of long-run income more than temporary tax cuts.
A cable television broadcast of a movie is
a. excludable and rival in consumption. b. excludable and not rival in consumption. c. not excludable and rival in consumption. d. not excludable and not rival in consumption.
Open-market purchases by the Fed make the money supply
a. increase, which makes the value of money increase. b. increase, which makes the value of money decrease. c. decrease, which makes the value of money decrease. d. decrease, which makes the value of money increase.
You use $5,000 of your own money to start a dog-walking business. During the first year you earn a 6% return on your investment. If the current interest rate is 8%, you earn an economic profit of
A. -$60. B. -$100. C. $200. D. $300.