1) The equilibrium interest rate is 5% per year. A usury ceiling is established,
ID: 1196347 • Letter: 1
Question
1)The equilibrium interest rate is 5% per year. A usury ceiling is established, at 10% per year. The usury law is enforced. What will happen as a result?
There will be a shortage of credit.
There will be a surplus of credit.
The usury law will not have any effect.
None of the above is correct.
Not enough information has been given to answer the question.
2)The equilibrium interest rate is 10% per year. A usury ceiling is established, at 5% per year. The usury law is enforced. What will happen as a result?
There will be a shortage of credit.
There will be a surplus of credit.
The usury law will not have any effect.
None of the above is correct.
Not enough information has been given to answer the question.
3)Zany Corporation is considering an investment project. The entire cost of the project, which is $1000, comes on one day. All of the revenues, which are $1100, come exactly one year later. The interest rate is 5% per year. In this situation, which of the following statements is true?
The project has positive net present discounted value; the firm should undertake the project.
The project has zero net present discounted value; the firm should undertake the project.
The project has negative net present discounted value; the firm should not undertake the project.
The project has negative net present discounted value, but the firm should undertake the project anyway.
Not enough information has been given to answer the question.
5)Jethro has been promised a payment of $1000, which is to be paid exactly 8 years from now. He is completely certain that the payment will in fact be made. Jethro believes that the appropriate discount rate is 5% per year, and that this will continue to be true for at least 8 years to come. What is the present discounted value of this payment?
$1000
$8000
$1000/8
$1000/(1.05)
$1000/(1.05)8
6)
The demand curve for credit (also known as the demand curve for loanable funds) is represented graphically by a line that slopes downward as we move from left to right. This is because
Question 7 options:
at a higher wage rate, firms will want to hire fewer workers.
a usury ceiling will keep interest rates down.
some investment projects that would be approved at a lower interest rate will not be approved at a higher interest rate.
the antitrust laws keep some companies from making investments.
smokers want to borrow money to buy cigarettes, but the cigarettes cause premature death.
7)The Lorenz Curve for country X is always below the Lorenz Curve for country Y. This implies that
the distribution of income is more equal in X than in Y.
the distribution of income is more equal in Y than in X.
the Gini Ratio is larger in Y than in X.
(a) and (c).
Not enough information has been given to answer the question.
8) The distribution of income in the entire world is ______________ the distribution of income within most countries.
more equal than
more unequal than
about the same as
different from (in ways that cannot be described)
all of the above.
9) If the demand for highly skilled workers increases more rapidly than the supply of highly skilled workers, the distribution of labor earnings will
become more equal
become more unequal
not change
become more equal on Tuesdays and less equal on Wednesdays
All of the above
a)There will be a shortage of credit.
b)There will be a surplus of credit.
c)The usury law will not have any effect.
d)None of the above is correct.
e)Not enough information has been given to answer the question.
Explanation / Answer
1) b) There will be surplus of credit.
2) a) There will be shortage of credit.
3) c) The project has negative net present discounted value, the firm should not undertake the project.
5) e) $1000/(1.05)8
6) b) A usury cieling will keep interest rates down
7) d) (a) and (c)
8) a) more equal than
9) b) Will become more unequal
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