If government spending and tax collections both increase by the same amount, then according to the classical loanable funds market:
a. the demand for loanable funds will increase and the interest rate will rise.
b. the demand for loanable funds will fall and the interest rate will rise.
c. savings will rise and interest rates will fall.
d. nothing will shift and the interest rate will remain constant.
e. none of the above.
B
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Consider two resource markets in which the demand curves slope downward. In market A, the supply curve is horizontal, equilibrium price is $6, and 100 units of the resource are hired. In market B, the supply curve is vertical, equilibrium price is $20, and 30 units of the resource are hired. Which of the following is true?
a. Total resource earnings are the same in both markets. b. Total resource earnings are greater in market A. c. Total resource earnings are greater in market B. d. There is more economic rent in market A. e. There is derived demand in market A, but not in market B.
What is the maximum amount an investor should be willing to pay for a two-year $200 annuity, if the best alternative investment earns 20 percent per annum?
a. $305.56 b. $166.67 c. $138.89 d. $268.79