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On January 1, Sam took out a $1,000 personal loan from Payday Palace, a hypothetical short-term cash advance company, that charged him a fixed monthly interest rate. On January 31, Sam repaid this loan with interest, for a total repayment of $1,100. The rate of inflation during January was 2%. Which of the answer choices best describes the purchasing power of Payday Palace concerning its loan to Sam?

A. Payday Palace gained purchasing power since it earned $100 in interest from the loan.

B. Payday Palace gained purchasing power since its real return on the loan was positive.

C. Payday Palace lost purchasing power since the interest rate its imposed on the loan was less than the rate of inflation

D. Payday Palace lost purchasing power since its real return on the loan was less than ten percent.

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Anne Gillian Duero
Anne Gillian DueroLv10
28 Sep 2019

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*Article*

The U.S. economy is revving up just as Europe and other major economies lose steam, jeopardizing a rare period in which the world’s largest economies have been accelerating in unison.

The European Central Bank on Thursday took another step toward ending the massive stimulus measures it has used in an effort to boost growth since 2015. But ECB officials also said they would hold interest rates steady through summer next year, a sign that they felt the eurozone economy remains fragile.

In an indication of growing economic vigor in the U.S., the Federal Reserve on Wednesday tapped the brakes again, raising the benchmark interest rate by a quarter of a percentage point and signaling it may quicken the pace of future rate increases because of a strengthening economy and tightening labor markets.

The economies’ diverging paths were expressed most prominently in the euro, which on Thursday suffered its worst day against the dollar in two years. The euro lost 1.88% against the U.S. currency, its biggest drop since the day after the U.K. voted to leave the European Union.

The central bank announcements over the past two days offered the latest evidence that heady growth expectations for Europe and other major economies outside the U.S. might not be achieved, defying analysts who began the year convinced that the world economy’s first synchronized expansion in years would continue.

The International Monetary Fund said in January that the world’s seven largest economies each grew more than 1.5% in 2017, and it predicted more solid growth this year. Global manufacturing was booming and the IHS Markit global purchasing managers index that month was its strongest in nearly seven years.

Many investors counted on a revitalized Europe to lead that growth in 2018. But recent labor strikes in France, political turmoil in Italy and softer economic data are causing investors to rethink that premise. Germany last week reported that factory orders dropped 2.5% in April, while eurozone growth was 0.4% in the first quarter, down from 0.7% in the final quarter of 2017. On Thursday, the ECB revised down its eurozone growth expectations for this year to 2.1%, from 2.4%.

“When we look at Europe, the very strong momentum we saw in data last year has been waning this year,” said Holly MacDonald, chief investment strategist at Bessemer Trust.

Europe isn’t the only region to show signs of cooling down. The People’s Bank of China this week also left a suite of key short-term interest rates unchanged. New data showed business activity, including investment and retail sales, slowed in May, suggesting the world’s second-largest economy is facing growing headwinds.

The disappointing figures “warranted China to take a cautious tone,” said Tommy Xie, an economist at OCBC Bank.

In the U.S., meanwhile, recent data suggest an economic expansion that just became the second-longest in the nation’s history is accelerating, rather than slowing down.

The U.S. economy grew modestly over the winter—at a 2.2% annual rate in January through March—but seems to be ramping up further this spring. Growth is on track to exceed a 4% pace in the three months ending in June, which would be the fastest of any quarter in almost four years.

Spending at U.S. retailers soared 0.8% in May, the biggest jump in six months, according to U.S. government data released on Thursday. Consumers, spurred by tax cuts and the lowest unemployment in half a century, shelled out more for cars, clothing, building supplies, health products and bar tabs.

“We may be entering a new level of consumer spending right now,” said economist Robert Frick of the Navy Federal Credit Union. He pointed out that more and more blue-collar workers are finding work as the labor expansion endures, and those workers tend to spend a greater portion of their incomes, out of necessity, than higher-income workers, who save more.

He added that low unemployment, strong consumer spending and modest inflation are likely to keep the economy on strong footing this year: “We’re in a Goldilocks zone right now.”

In the eurozone, rates have stayed pegged at negative levels—now at minus 0.4%—since 2014. Despite some initial concerns, investors have become more relaxed about possible unintended effects of negative rates on the economy.

On Thursday, investors reacted to the ECB’s announcement to end bond purchases while keeping rates low longer by selling the euro and bidding up stocks. It is the latest example of interest-rate moves returning to the driver’s seat of monetary policy. In the wake of the financial crisis, central bankers rolled out a raft of unprecedented and complex measures, including bond buying and lending facilities for banks, pitching them as a way to lower long-term borrowing costs at a time when short-term rates could go no lower.

Not all investors are ready to write off Europe’s growth prospects. Roland Kaloyan, head of European equity strategy at ?Société Générale, believes that lackluster economic data in the first quarter is a “temporary soft patch,” and that “fundamentals remain very solid for eurozone growth,” whereas he expects the U.S. economy to go into a recession around 2020.

Others believe the euro will continue to weaken further this year, but think that markets are swinging too far in favor of U.S. growth.

Next year, “we expect the euro to rebound against the dollar even if the ECB only hikes late in the year,” said Ingvild Borgen Gjerde, an analyst at Capital Economics. “We think the Fed’s tightening cycle will come to an end in mid-2019, far sooner than is discounted in the markets.”

*question*

4. Should a goal of monetary policymakers be to raise the value of its currency? How would a currency appreciate both help and hurt an economy? If a central bank wants to appreciate its currency, how in practice would it do so?

Can the U.S. Postal Service be considered a monopoly in first-class mail? Why or why not?

Explain the barriers to entry in this market.

What has happened to the price elasticity of demand for first-class mail in recent years?

What situations in this market create price discrimination?

Below is the reference text:

The Mail Monopoly

The U.S. Post Office was granted a monopoly in 1775 and has operated under federal

protection ever since. In 1971, Congress converted the Post Office Department into a

semi-independent agency called the U.S. Postal Service, or USPS, which had total

revenue of about $70 billion in 2009. Because of the national recession, revenue in 2009

was down 9 percent from 2008 and about the same as in 2006. More than 650,000

employees at 37,000 post offices deliver an average of 177 billion pieces of mail a year to

144 million home and business addresses. This amounts to about 40 percent of the

world’s total mail delivery. USPS pays no taxes and is exempt from local zoning laws. It

has a legal monopoly in delivering regular, first-class letters and has the exclusive right to

use the space inside your mailbox. Other delivery services such as FedEx or UPS cannot

deliver to mail boxes or post office boxes.

The USPS monopoly has suffered in recent years because of rising costs and growing

competition from new technologies. The price of a first-class stamp climbed from 6 cents

in 1970 to 44 cents by 2010—a growth rate twice that of inflation. Long-distancephone

service, one possible substitute for first-class mail, is much cheaper today than in 1970.

New technologies such as email, ecards, online bill-payment, text messaging, and socialnetworking

sites also displace USPS delivery services (email messages now greatly

outnumber first-class letters). Because its monopoly applies only to regular first-class

mail, USPS has lost chunks of other business to private firms offering lower rates and

better service. The United Parcel Service (UPS), for example, is more mechanized and

more containerized than the USPS and thus has lower costs and less breakage. The USPS

has tried to emulate UPS but with only limited success. After Hurricane Katrina, it took

seven months to reopen the USPS processing and distribution center in New Orleans.

Rivals UPS, FedEx, and DHL all restored service within three weeks.

When the Postal Service raised third-class (“junk” mail) rates, businesses substituted

other forms of advertising, including cable TV, telemarketing, and the Internet. UPS and

other rivals now account for most ground-shipped packages. Even USPS’s first-class

monopoly is being threatened, because FedEx and others have captured 90 percent of the

overnight mail business. Thus, USPS is losing business because of competition from

overnight mail and from new technologies.

USPS has been fighting back, trying to leverage its monopoly power while increasing

efficiency. On the electronic front, USPS tried to offer online postage purchases, online

bill-paying service, and online document transmission service. But these new products

were scrapped as failures. Changing technology and competition have been eroding

USPS’s government-granted monopoly. USPS lost about $4 billion in 2009 and said that

without drastic changes, losses would total $238 billion over the next decade. Even a

legal monopoly can lose money. Proposed changes include postage increases and

dropping Saturday delivery.

Sources: Corey Dade, “Post Office Renews Campaign to End Saturday Mail Service,”

Wall Street Journal, 3 March 2010; Liz Robbins, “Postal Service Revives Cutback

Plans,” New York Times, 2 March 2010; “The Trap: The Curse of Long-term

Unemployment Will Bedevil the Economy,” The Economist, 14 January 2010; and the

USPS home page at http://www.usps.com.

""Please give answer with simple explaination""""Please give answer with simple explaination""""Please give answer with simple explaination""

1. In every society, choices must be made because resources are

a. Infinite, but economic want are finite

b. Finite, but economic wants are insatiable

c. Unlimited, but economic wants limited

d. Limited, and so are economic wants

2. Which question is an illustration of a microeconomic question

a. Is the quantity of wine purchased in one year dependent upon the price of wine?

b. Does government spending influence the total level of employment in the economy?

c. Is the purchasing power of the dollar higher or lower today than it was in 2000?

d. Is capitalism superior to socialism?

3. The purpose of the ceteris paribus assumption used in economic analysis is to :

a. Avoid making normative statements

b. A void the post hoc, ergo propter hoc fallacy

c. Make sure that all relevant factors are considered

d. Restrict the analysis to effect of a single economic factor

4. The profit motive is

a. Ineffective at producing consumer goods

b. Inherently beneficial to society if left alone to pursue its own self interests

c. Effective at producing goods when consumption is non-rival or non-excludable

d. Is often at odds with societies interests

5. In the system of central planning

a. There is repaid of the infrastructure

b. There is severe inflation in wholesale and retail prices

c. Economic growth leads to widespread unemployment among workers

d. The outputs of some industries become inputs for other industries

6. The market system communicates changes in supply and demand and elicits appropriate responses from businesses and resource suppliers. This is known as the:

a. Rationing function of prices

b. Guiding function of prices

c. Monetary function of prices

d. Circular flow of income

7. An increase in the quantity of automobiles supplied would be caused by which be caused by which of the following?

a. An increase in the demand for automobiles

b. A decrease in the demand for automobiles

c. Higher prices for steel

d. Higher prices for gasoline

8. All of the following would cause an increase in the demand for private airplanes at a given price, except a:

a. Decrease in interest rates

b. Increase in consumer incomes

c. Decrease in taxes on luxury goods

d. Decrease in the costs of constructing private airplanes

9. In modern economies of mass production,

a. Biological need motivates most consumption

b. The intrinsic value of goods and services motivates mass consumption

c. Affluence makes relative depravation meaningless

d. Invidious comparison motivates much of mass consumption

10. a more equal distribution of income in the United States would result in greater total consumer satisfaction. This statement is based on the concept that:

a. Income inequality is unfair

b. Income inequality is undemocratic

c. Income equality stimulates efficiency

d. Incomes are subject to diminishing marginal utility

11. While command systems suffer from incentive problems, market economies

a. Have no incentive problems

b. Suffer from incentive problems of their own

c. Tend to resolve all problems by their own dynamics

d. Have problems to the degree that there is government interference.

12. What economic concepts can be used to explain the reason that a new car purchased by a consumer and driven off a new car lot decrease in value almost immediately compared with the value of the same make and model of a car still on the new car lot?

a. Positive and negative externalities

b. Liability rules and lawsuits

c. The Coase theorem and moral hazard

d. Asymmetric information and adverse selection

13. Consider a situation where the U.S. Congress wants to place a special tax on private airplanes to increase tax revenue. This tax would only be effective in raising new tax revenues if the price elasticity of:

a. Supply is elastic

b. Supply is inelastic

c. Demand is elastic

d. Demand is inelastic

14. Under what circumstances would you expect economic profits to be zero in a particular industry?

a. During a recession

b. When there is little competition in the industry

c. When the industry is neither expanding nor contracting

d. When the demand for the product being produced is increasing

16. If economic resources are perfectly interchangeable between the two products shown on a production possibilities graph:

a. The economy will always be at full employment

b. More of one product can be produced without producing less fo the other product

c. The production possibilities curve would be straight line

d. The two products are of equal value to the economy

17. Opportunity cost is best defined as:

a. Marginal cost minis marginal benefit

b. The time spent on an economic activity

c. The value of the best foregone alternative

d. The money cost of an economic decision

18. All of the following would affect the position of a country production possibilities curve expect:

a. The quality of labor

b. The level of employment

c. The amount of the capital stock

d. Technological progress

19. The post hoc, ergo propter hoc fallacy consists of:

a. Using an example to a different point

b. Inferring causality from chronological sequence

c. Jumping to conclusions from an inadequate number of cases

d. Arguing for or against the person rather than the position being supported

20. Which is one of the five fundamental question that needs to be answered by economic system

a. What is the rate of unemployment?

b. Who will be the richest person in the economy?

c. What goods and services will be produced?

d. Why are the prices for goods and services so high?

21. The institution of private property is sustained over time by:

a. Competition

b. Bequests

c. Self-interest

d. Free enterprise

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