If you anticipate that the inflation rate is going to rise from three percent to 10 percent next year, you should
A) save your funds at a fixed rate of interest.
B) borrow funds at a fixed rate of interest.
C) keep your funds in your sock drawer.
D) wait to buy a house until next year.
B
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In 2001, Pablo earned $200 per week at his job. In 2011, Pablo earned $240 per week. If the CPI in 2001 was 100 and the CPI in 2011 was 152, then
A) Pablo was better off in 2011 because his weekly wage was higher. B) the 2001 wage measured in 2011 dollars is $157.89. C) the 2011 wage measured in 2001 dollars is $157.89. D) the 2001 wage measured in 2011 dollars is $131.58. E) the 2001 wage measured in 2011 dollars is $100.
Risk aversion is best explained by
a. timidity. b. increasing marginal utility of income. c. constant marginal utility of income. d. decreasing marginal utility of income.