Question 1

Government policies that encourage savings

Accepted Answer

A)  reduce interest rates. 
B)  increase interest rates. 
C)  have no effect on interest rates. 
D)  lower the net present value of all investments. 
A)  reduce interest rates. 
B)  increase interest rates. 
C)  have no effect on interest rates. 
D)  lower the net present value of all investments.

Question 2

If a firm needs one machine to produce a product,and must replace the machine when it wears out,then the firm should pick a durability level of the machine that

Accepted Answer

A)  minimizes the expense today. 
B)  minimizes the present discounted cost of having the machine forever. 
C)  maximizes the future value of the machine. 
D)  minimizes the future value of the machine. 
A)  minimizes the expense today. 
B)  minimizes the present discounted cost of having the machine forever. 
C)  maximizes the future value of the machine. 
D)  minimizes the future value of the machine.

Question 3

If the interest rate received in Mexico is greater than that obtained in the United States,

Accepted Answer

A)  the interest rate will decrease in the United States in the future. 
B)  the interest rate will increase in the United States in the future. 
C)  the interest rate will increase in Mexico in the future. 
D)  the interest rate will not change in either country. 
A)  the interest rate will decrease in the United States in the future. 
B)  the interest rate will increase in the United States in the future. 
C)  the interest rate will increase in Mexico in the future. 
D)  the interest rate will not change in either country.

Question 4

You invest an amount today for four years that pays 6% annually.The bank compounds annually.At the end of the four years you will have $150.What amount must you invest today?

Accepted Answer

A)  $148.81 
B)  $138.81 
C)  $128.81 
D)  $118.81 
A)  $148.81 
B)  $138.81 
C)  $128.81 
D)  $118.81

Question 5

You place $100 in a bank account that pays 8%.If you remove the interest you receive each year you can turn your stock into a flow of

Accepted Answer

A)  $108 per year. 
B)  $100 per year. 
C)  $80 per year. 
D)  $8 per year. 
A)  $108 per year. 
B)  $100 per year. 
C)  $80 per year. 
D)  $8 per year.

Question 6

Consider a wine maker who has put her wine in bottles.The question is whether to store the wine for a marginal cost of $1 per year or to sell the wine today at a price of $10.If the interest rate is 6%,how much must the price of the wine increase in the next year to justify storing it?

Accepted Answer

A)  $1.66 
B)  $1.27 
C)  $0.72 
D)  $0.45 
A)  $1.66 
B)  $1.27 
C)  $0.72 
D)  $0.45

Question 7

As the interest rate rises,the present value of a given perpetual stream of income

Accepted Answer

A)  increases. 
B)  decreases. 
C)  does not change. 
D)  approaches infinity. 
A)  increases. 
B)  decreases. 
C)  does not change. 
D)  approaches infinity.

Question 8

Individuals who lease a new car

Accepted Answer

A)  have a higher discount rate than those who buy. 
B)  have a lower discount rate than those who buy. 
C)  have the same discount rate as those who buy. 
D)  behave irrationally and are taken advantage of by car companies. 
A)  have a higher discount rate than those who buy. 
B)  have a lower discount rate than those who buy. 
C)  have the same discount rate as those who buy. 
D)  behave irrationally and are taken advantage of by car companies.

Question 9

The growth over time in the spread between price and marginal cost of an exhaustible resource is equal to

Accepted Answer

A)  zero. 
B)  one. 
C)  the interest rate. 
D)  the present value of the reserves. 
A)  zero. 
B)  one. 
C)  the interest rate. 
D)  the present value of the reserves.

Question 10

A capital gains tax acts to

Accepted Answer

A)  reduce the interest rate received by loan demanders. 
B)  increase the interest rate received by loan demanders. 
C)  increase the interest rate received by loan suppliers. 
D)  reduce the interest rate received by loan suppliers. 
A)  reduce the interest rate received by loan demanders. 
B)  increase the interest rate received by loan demanders. 
C)  increase the interest rate received by loan suppliers. 
D)  reduce the interest rate received by loan suppliers.

Government policies that encourage savings

If a firm needs one machine to produce a product,and must replace the machine when it wears out,then the firm should pick a durability level of the machine that

If the interest rate received in Mexico is greater than that obtained in the United States,

You invest an amount today for four years that pays 6% annually.The bank compounds annually.At the end of the four years you will have $150.What amount must you invest today?

You place $100 in a bank account that pays 8%.If you remove the interest you receive each year you can turn your stock into a flow of

Consider a wine maker who has put her wine in bottles.The question is whether to store the wine for a marginal cost of $1 per year or to sell the wine today at a price of $10.If the interest rate is 6%,how much must the price of the wine increase in the next year to justify storing it?

As the interest rate rises,the present value of a given perpetual stream of income

Individuals who lease a new car

The growth over time in the spread between price and marginal cost of an exhaustible resource is equal to

A capital gains tax acts to

Introduction

Supply and Demand

Applying the Supply and Demand Model

Consumer Choice

Applying Consumer Theory

Firms and Production

Costs

Competitive Firms and Markets

Applying the Competitive Model

General Equilibrium and Economic Welfare

Monopoly

Pricing and Advertising

Oligopoly and Monopolistic Competition

Game Theory

Factor Markets

Uncertainty

Externalities, Open-Access, and Public Goods

Asymmetric Information

Contracts and Moral Hazards

Filters

Exam 16: Interest Rates, Investments, and Capital Markets

Government policies that encourage savings

If a firm needs one machine to produce a product,and must replace the machine when it wears out,then the firm should pick a durability level of the machine that

If the interest rate received in Mexico is greater than that obtained in the United States,

You invest an amount today for four years that pays 6% annually.The bank compounds annually.At the end of the four years you will have $150.What amount must you invest today?

You place $100 in a bank account that pays 8%.If you remove the interest you receive each year you can turn your stock into a flow of

Consider a wine maker who has put her wine in bottles.The question is whether to store the wine for a marginal cost of $1 per year or to sell the wine today at a price of $10.If the interest rate is 6%,how much must the price of the wine increase in the next year to justify storing it?

As the interest rate rises,the present value of a given perpetual stream of income

Individuals who lease a new car

The growth over time in the spread between price and marginal cost of an exhaustible resource is equal to

A capital gains tax acts to

Introduction

Supply and Demand

Applying the Supply and Demand Model

Consumer Choice

Applying Consumer Theory

Firms and Production

Costs

Competitive Firms and Markets

Applying the Competitive Model

General Equilibrium and Economic Welfare

Monopoly

Pricing and Advertising

Oligopoly and Monopolistic Competition

Game Theory

Factor Markets

Uncertainty

Externalities, Open-Access, and Public Goods

Asymmetric Information

Contracts and Moral Hazards

Filters