Question 1

A decrease in interest rate will:

Accepted Answer

A) rotate the budget line clockwise around the endowment point. 
B) parallel shift the budget line up. 
C) parallel shift the budget line down. 
D) rotate the budget line counter- clockwise around the endowment point. 
A) rotate the budget line clockwise around the endowment point. 
B) parallel shift the budget line up. 
C) parallel shift the budget line down. 
D) rotate the budget line counter- clockwise around the endowment point. D

Question 2

The life cycle model hypothesizes that:

Accepted Answer

A) older people are less risk averse. 
B) younger people spend more than they earn. 
C) older people spend more than they earn. 
D) younger people earn more than they spend. 
A) older people are less risk averse. 
B) younger people spend more than they earn. 
C) older people spend more than they earn. 
D) younger people earn more than they spend. B

Question 3

Firms that sell both consumer capital goods and the complementary good

Accepted Answer

A) capture all the consumer surplus of the consumer capital good 
B) sell the capital good at marginal cost 
C) maximize profit on both goods individually 
D) capture all the consumer surplus of the complementary good 
A) capture all the consumer surplus of the consumer capital good 
B) sell the capital good at marginal cost 
C) maximize profit on both goods individually 
D) capture all the consumer surplus of the complementary good D

Question 4

Figure 5A
 
-In Figure 5A, changes in the interest rate cause the intertemporal budget:

Accepted Answer

A) the intertemporal budget lines pivot around point B. 
B) line to shift from the line AE' to DB. 
C) line to shift from the line DB to AE'. 
D) lines to pivot around point A. 
A) the intertemporal budget lines pivot around point B. 
B) line to shift from the line AE' to DB. 
C) line to shift from the line DB to AE'. 
D) lines to pivot around point A.

Question 5

In equilibrium, the marginal rate of time preference is equal to:

Accepted Answer

A) 1/(1 + i). 
B) 1/i. 
C) 1 + i. 
D) i. 
A) 1/(1 + i). 
B) 1/i. 
C) 1 + i. 
D) i.

Question 6

Using old capital goods, such as machinery and computers:

Accepted Answer

A) is not a good idea since firms have to use the newest technology if they are to compete successfully in the market place. 
B) may work if accompanied with the necessary skills in terms of labour. 
C) is a valid strategy if their prices are low enough for the rate of return to rival the one for newer capital goods. 
D) is not an option in today's world given the tremendous value built in the newer machines. 
A) is not a good idea since firms have to use the newest technology if they are to compete successfully in the market place. 
B) may work if accompanied with the necessary skills in terms of labour. 
C) is a valid strategy if their prices are low enough for the rate of return to rival the one for newer capital goods. 
D) is not an option in today's world given the tremendous value built in the newer machines.

Question 7

Suppose an individual in period one of their life is borrowing. An increase in interest rates causes C0 to fall, but the effect on C1 is ambiguous. Explain why this is true.

Accepted Answer

The income effect of an interest increas

Question 8

In periods 0 and 1, Ralph consumed two goods, x1 and x2, and his utility functions in the two periods were identical. In period 0 the prices of x1 and x2 were $2 and $1 respectively, and Ralph consumed 10 units of x1 and 80 units of x2. In period 1 the prices of x1 and x2 were identical, and equal to $1. If Ralph consumed 15 units of x1 and 65 units of x2 in period 1, then the Paasche quantity index is equal to:

Accepted Answer

A) 95/100. 
B) 9/8. 
C) 8/9. 
D) 100/95. 
A) 95/100. 
B) 9/8. 
C) 8/9. 
D) 100/95.

Question 9

If someone receives $24 from a pawnbroker for a watch and redeems it one month later for $30, he has:

Accepted Answer

A) paid about 150% interest at an annual rate to borrow $24 for one month. 
B) paid about 25% interest at an annual rate to borrow $24 for one month. 
C) borrowed money without paying interest. 
D) paid about 300% interest at an annual rate to borrow $24 for one month. 
E) paid about 72% interest at an annual rate to borrow $24 for one month. 
A) paid about 150% interest at an annual rate to borrow $24 for one month. 
B) paid about 25% interest at an annual rate to borrow $24 for one month. 
C) borrowed money without paying interest. 
D) paid about 300% interest at an annual rate to borrow $24 for one month. 
E) paid about 72% interest at an annual rate to borrow $24 for one month.

Question 10

It is conventional to use the present value criterion rather than the future value criterion:

Accepted Answer

A) although they are equivalent. 
B) because it gives smaller results. 
C) because it gives better results. 
D) because it gives larger results. 
A) although they are equivalent. 
B) because it gives smaller results. 
C) because it gives better results. 
D) because it gives larger results.

Question 11

The rate of interest you pay to use money is called the:

Accepted Answer

A) prime rate. 
B) borrowing rate. 
C) discount rate. 
D) deposit rate. 
A) prime rate. 
B) borrowing rate. 
C) discount rate. 
D) deposit rate.

Question 12

An increase in income in period 0 will:

Accepted Answer

A) parallel shift the budget line up. 
B) rotate the budget line clockwise around the endowment point. 
C) parallel shift the budget line down. 
D) rotate the budget line counter- clockwise around the endowment point. 
A) parallel shift the budget line up. 
B) rotate the budget line clockwise around the endowment point. 
C) parallel shift the budget line down. 
D) rotate the budget line counter- clockwise around the endowment point.

Question 13

An individual that deposits $1,000 in the bank today and receives $1,368 in three years is earning an annual interest rate of approximately

Accepted Answer

A) 9.2% 
B) 36.8% 
C) 12.3% 
D) 11% 
A) 9.2% 
B) 36.8% 
C) 12.3% 
D) 11%

Question 14

The optimal time to harvest is:

Accepted Answer

A) when the value of the crop is maximized. 
B) when the rate of growth of the crop is maximized. 
C) when the present value of the crop is maximized. 
D) when the rate of growth of the crop is zero. 
A) when the value of the crop is maximized. 
B) when the rate of growth of the crop is maximized. 
C) when the present value of the crop is maximized. 
D) when the rate of growth of the crop is zero.

Question 15

When the interest rate i rises, C0:

Accepted Answer

A) decreases because of the income effect. 
B) increases because of the substitution effect. 
C) increases because of a total effect. 
D) decreases because of a total effect. 
A) decreases because of the income effect. 
B) increases because of the substitution effect. 
C) increases because of a total effect. 
D) decreases because of a total effect.

Question 16

Consumer capital includes goods which are:

Accepted Answer

A) financed in the long term. 
B) passed between generations. 
C) consumed with complementary goods. 
D) valuable in one time period only. 
A) financed in the long term. 
B) passed between generations. 
C) consumed with complementary goods. 
D) valuable in one time period only.

Question 17

It has been documented that an accounting degree offers a higher financial rate of return than an history degree. Why would any student enroll in a history program?

Accepted Answer

A) For logistics reasons, the accounting programs are capped. 
B) Calculating these returns are always subject to error. 
C) A utility return makes up the difference. 
D) Prospective history students are not good with numbers. 
A) For logistics reasons, the accounting programs are capped. 
B) Calculating these returns are always subject to error. 
C) A utility return makes up the difference. 
D) Prospective history students are not good with numbers.

Question 18

A person who defers consumption to another day is concerned with the:

Accepted Answer

A) net present value of money. 
B) net future value of money. 
C) future value of money. 
D) present value of money. 
A) net present value of money. 
B) net future value of money. 
C) future value of money. 
D) present value of money.

Question 19

A household faces a higher interest rate on borrowed funds than on savings. Show that an increase in the interest rate on savings does not affect the amount of money borrowed and that an increase in the interest rate on loans does not affect the amount of savings.

Accepted Answer

A higher interest rate on savi

Question 20

According to the separation theorem, individuals choose consumption expenditures by choosing the one that maximizes utility while making the present value of income:

Accepted Answer

A) not larger than the present value of consumption expenditures. 
B) independent of the present value of consumption expenditures. 
C) not smaller than the present value of consumption expenditures. 
D) equal to the present value of consumption expenditures. 
A) not larger than the present value of consumption expenditures. 
B) independent of the present value of consumption expenditures. 
C) not smaller than the present value of consumption expenditures. 
D) equal to the present value of consumption expenditures.

A decrease in interest rate will:

The life cycle model hypothesizes that:

Firms that sell both consumer capital goods and the complementary good

Figure 5A -In Figure 5A, changes in the interest rate cause the intertemporal budget:

In equilibrium, the marginal rate of time preference is equal to:

Using old capital goods, such as machinery and computers:

Suppose an individual in period one of their life is borrowing. An increase in interest rates causes C0 to fall, but the effect on C1 is ambiguous. Explain why this is true.

If someone receives $24 from a pawnbroker for a watch and redeems it one month later for $30, he has:

It is conventional to use the present value criterion rather than the future value criterion:

The rate of interest you pay to use money is called the:

An increase in income in period 0 will:

An individual that deposits $1,000 in the bank today and receives $1,368 in three years is earning an annual interest rate of approximately

The optimal time to harvest is:

When the interest rate i rises, C₀:

Consumer capital includes goods which are:

It has been documented that an accounting degree offers a higher financial rate of return than an history degree. Why would any student enroll in a history program?

A person who defers consumption to another day is concerned with the:

A household faces a higher interest rate on borrowed funds than on savings. Show that an increase in the interest rate on savings does not affect the amount of money borrowed and that an increase in the interest rate on loans does not affect the amount of savings.

According to the separation theorem, individuals choose consumption expenditures by choosing the one that maximizes utility while making the present value of income:

Microeconomics: a Working Methodology

A Theory of Preferences

Demand Theory

More Demand Theory

Production Cost: One Variable Input

Production Cost: Many Variable Inputs

The Theory of Perfect Competition

Applications of the Competitive Model

Monopoly

Input Markets and the Allocation of Resources

Labour Market Applications

Competitive General Equilibrium

Price Discrimination Monopoly Practices

Introduction to Game Theory

Game Theory and Oligopoly

Choice Making Under Uncertainty

Assymmetric Information, the Rules of the Game, and Externalities

The Theory of the Firm

Assymetric Information and Market Behaviour

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Exam 5: Intertemporal Decision Making and Capital Values

A decrease in interest rate will:

The life cycle model hypothesizes that:

Firms that sell both consumer capital goods and the complementary good

Figure 5A -In Figure 5A, changes in the interest rate cause the intertemporal budget:

In equilibrium, the marginal rate of time preference is equal to:

Using old capital goods, such as machinery and computers:

Suppose an individual in period one of their life is borrowing. An increase in interest rates causes C0 to fall, but the effect on C1 is ambiguous. Explain why this is true.

If someone receives $24 from a pawnbroker for a watch and redeems it one month later for $30, he has:

It is conventional to use the present value criterion rather than the future value criterion:

The rate of interest you pay to use money is called the:

An increase in income in period 0 will:

An individual that deposits $1,000 in the bank today and receives $1,368 in three years is earning an annual interest rate of approximately

The optimal time to harvest is:

When the interest rate i rises, C0:

Consumer capital includes goods which are:

It has been documented that an accounting degree offers a higher financial rate of return than an history degree. Why would any student enroll in a history program?

A person who defers consumption to another day is concerned with the:

A household faces a higher interest rate on borrowed funds than on savings. Show that an increase in the interest rate on savings does not affect the amount of money borrowed and that an increase in the interest rate on loans does not affect the amount of savings.

According to the separation theorem, individuals choose consumption expenditures by choosing the one that maximizes utility while making the present value of income:

Microeconomics: a Working Methodology

A Theory of Preferences

Demand Theory

More Demand Theory

Production Cost: One Variable Input

Production Cost: Many Variable Inputs

The Theory of Perfect Competition

Applications of the Competitive Model

Monopoly

Input Markets and the Allocation of Resources

Labour Market Applications

Competitive General Equilibrium

Price Discrimination Monopoly Practices

Introduction to Game Theory

Game Theory and Oligopoly

Choice Making Under Uncertainty

Assymmetric Information, the Rules of the Game, and Externalities

The Theory of the Firm

Assymetric Information and Market Behaviour

Filters

When the interest rate i rises, C₀: