Econ 002 Midterm 2
51 terms by leighanneisenhauer
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Alice says that the present value of $700 to be received one year from today if the interest rate is 6 percentis less than the present value of $700 to be received two years from today if the interest rate is 3 percent.Beth says that $700 saved for one year at 6 percent interest has a smaller future value than $700 saved fortwo years at 3 percent interest.
a. Both Alice and Beth are correct.
b. Both Alice and Beth are incorrect.
c. Only Alice is correct.
d. Only Beth is correct.
Mary talked to several stockbrokers and made the following conclusions. Which, if any, of her conclusions are correct?
a. It is relatively easy to reduce firm‐specific risk by increasing the number of companies one holds stock in.
b. Stock prices, even if not exactly a random walk, are very close to it.
c. Some people have made a lot of money in the stock market by using insider information, but these cases are not contrary to the efficient markets hypothesis.
d. All of Mary's conclusions are correct.
The country of Bienmundo does not trade with any other country. Its GDP is $30 billion. Its government purchases $5 billion worth of goods and services each year, collects $7 billion in taxes, and provides $3 billion in transfer payments to households. Private saving in Bienmundo amounts to $5 billion. What are consumption and investment in Bienmundo?
a. $18 billion and $5 billion, respectively
b. $21 billion and $4 billion, respectively
c. $13 billion and $7 billion, respectively
d. There is not enough information to answer the question.
In 2009, Modern Electronics, Inc. produced 60,000 calculators, employing 80 workers, each of whom worked 8 hours per day. In 2010, the same firm produced...