Hudson has two job offers when he graduates from college. Hudson views the offers as identical, except for the salary terms. The first offer is at a fixed annual salary of $45,000. The second offer is at a fixed salary of $25,000 plus a possible bonus of $40,000. Hudson believes that he has a 50-50 chance of earning the bonus. If Hudson takes the offer that maximizes his expected utility and he is risk-neutral, then
A. he will take the first offer.
B. he will take the second offer.
C. he is indifferent between the offers-both yield the same expected utility.
D. Indeterminate from the given information-we cannot say what he will do.
Answer: C
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The terms of trade can take on any value
A. below the seller's opportunity cost and above the buyer's opportunity cost. B. above the seller's opportunity cost. C. below the seller's opportunity cost and below the buyer's opportunity cost. D. above the seller's opportunity cost and below the buyer's opportunity cost.
If the real interest rate is 2% and expected inflation is 2%, the nominal interest rate is:
A) 0% B) 1% C) 2% D) 4%
When the price level falls
a. households want to lend more, so the interest rate rises making the quantity of goods and services demanded rise. b. households want to lend more, so the interest rate falls, making the quantity of goods and services demanded rise. c. households want to lend more, so the interest rate rises, making the quantity of goods and services demanded fall. d. None of the above are correct.
To the monetarists, the key to maintaining stable economic growth is
A. balancing the federal budget. B. maintaining adequate aggregate supply. C. maintaining a constant and low increase in money supply. D. maintaining adequate aggregate demand.