Draw a graph of the labor supply curve. Place an X at the point on the curve where the substitution effect and the income effect are exactly balanced.

If the interest rate is 5%, what is the present value of a security that pays you $1, 050 next year and $1,102.50 two years from now? If this security sold for $2200, is the yield to maturity greater or less than 5%? Why?

What will be an ideal response?

When people look at what has just happened in the economy to conjecture what is about to happen, it is known as ______.

a. gradualism b. indexing c. adaptive expectations d. natural rate