A village has five residents, each of whom has an accumulated savings of $50. Each villager can use the money to buy a government bond that pays 10 percent interest per year or to buy a year-old goat, send it onto the commons to graze, and sell it after one year. The price of the goat that the villager will get at the end of the year depends on the amount of weight it gains while grazing on the commons, which in turn depends on the number of goats sent onto the commons, as shown in the table below. Assume that if a villager is indifferent between buying a bond and buying a goat, the villager will buy a goat.Number of goatson the commonsPrice per 2-yearold goat ($)Income pergoat ($/year)180302752537020465155555 If the villagers purchase the socially optimal number of goats and bonds,
then total village income will be ________.
A. $15
B. $125
C. $250
D. $70
Answer: D
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The tools at the disposal of the Fed for changing the quantity of money do NOT include
A) open market operations. B) changing the required reserve ratio. C) changing discount rates. D) increasing the number of commercial banks.
What problem is addressed by a government safety net for the banking system? What problem is caused by the safety net?
What will be an ideal response?
Rational people having preferences for immediate benefits and delayed costs is another way of saying that:
A. money is worth less to us now than in the future. B. money is worth more to us now than in the future. C. the value of money does not change over time. D. rational people have insatiable wants.
If a household's income rises from $46,000 to $46,700 and its consumption spending rises from $35,800 to $36,400, then its: a. marginal propensity to consume is 0.86. b. marginal propensity to consume is 0.99. c. marginal propensity to consume is 0.98. d. marginal propensity to save is 0.01
e. marginal propensity to save is 0.86.