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The opportunity cost of an action is always equal to the value of:
 
A) The things you could have done instead of the action you choose to undertake.
B) The time you give up to undertake the action.
C) The money you give up to undertake the action.
D) The next best alternative for the resources used to undertake the action.

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Joshua Stredder
Joshua StredderLv10
17 Oct 2020

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Related questions

1. The opportunity cost of holding money is the:___.

a. nominal interest rate.

b. unemployment rate.

c. federal funds rate.

d. prevailing mortgage rate.

2. If government debt is not changing, then:___.

a. the economy is at long-run equilibrium.

b. the government’s budget must be balanced.

c. GDP must equal the natural rate of output.

d. capital per worker is constant.

3.The Taylor rule for monetary policy relates the output gap and inflation to the:___.

a. velocity of money.

b. reserve requirement on deposits.

c. federal funds rate.

d. meeting schedule of the FOMC

4. The inside lag is the:___.

A) time between a shock to the economy and the policy action responding to that shock.

B) time between a policy action and its influence on the economy.

C) time between a shock to the economy and the influence on the economy of a policy action.

D) difference between the time it takes to implement monetary policy and the time it takes to implement fiscal policy.

Short answer?

What causes shifts in the IS or LM curves?

1. __________, a term referring to the fact that for many good, as the level of production increases, the average cost of producing each individual unit declines.
a. Economies of scale
b. Specialization
c. Division of labor
d. Skill
2. Which of the following best characterizes the circular flow of income?
a. Household buy factors of production from business, and business buy goods and services from household
b. Business buy resources from the government, and household buy goods and services from business.
c. Businesses buy resources from households, and household use their income from the sale of resources to buy goods and services from businesses
d. The government purchases resources from businesses and households and then sells goods and services to businesses and households.
3. Philosophers draw a distinction between positive statements, which describe the world as it is, and _____________ which describe how the world should be.
a. Opportunity cost
b. Trade-off
c. Normative statement
d. Budget constraint

4. Scarcity implies that:
a. It is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available
b. Consumers are too poor to afford the goods and services available
c. At the current market price, consumers are willing to purchase more of a good than suppliers are willing to produce.
d. Consumers would be willing to purchase the same quantity of a good at a higher price.
5. The opportunity cost of an action.
a. Can be determined by considering both the benefits that flow from as well as the monetary costs incurred as a result of the action.
b. Can be determined by adding up the bills incurring as a result of the action
c. Can be objectively determined only by economist
d. Is a subjective valuation that can be determined only by the individual who chooses the action.
6.

Consider XYZ Bank that is established with $1500bn of deposits and $I000bn of equity. Its assets are some investments that are expected to pay off $2750bn in 1 years’ time. Suppose the rate of interest on safe assets is 10% a year and there is no risk premium to hold risky assets like XYZ Bank's investments.

 

  1. Suppose very shortly after being established the bank finds that it has been too optimistic

And now expects its investments to pay off $2475bn in 1 year time. What is the return to equity in the bank?

  1. -25%
  2. -50%
  3. -87.5%
  4. -100%
  5. None of A-D

 

  1. Suppose instead that the bank's liabilities were initially $2000bn of deposits with the rest

Being equity. Now what is the return to equity if the expected pay off of its investments falls to $2475bn in 1 year time?

  1. -25%
  2. -50%
  3. -87.5%
  4. -100%
  5. None of A-D

 

  1. Now suppose in the scenario of question 2 that very shortly after being established the

Bank finds that it has been too optimistic and now expects its investments to pay off $2475bn

In 1 year time and that the market now requires a premium of 10% a year to hold risky assets

Like XYZ Banks's investments. Now what is the return to equity?

  1. -25%
  2. -50%
  3. -87.5%
  4. -100%
  5. None of A-D

 

  1. Now suppose in the case Of question 3 that 'the bank's investment 'falls further, so that very

Shortly after being established the bank finds that it now expects its investments to pay

Off $2200bn in 1 year time and that the market now requires a premium of 10% a year to

Hold risky assets like XYZ Bank's investments, suppose now that the owners of the bank

Have an investment opportunity that will cost $500bn today and was certain to pay off the value

$1000bn in one year's time. Would the risk-neutral owners of the bank choose to put this?

Investment through the bank or would they prefer to invest in the project themselves using

Their own private funds?

  1. Not undertake the investment
  2. Undertake investment through 'the bank
  3. Undertake investment using private funds
  4. None of A-C

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