Under the liquidity premium theory a flat yield curve implies:
A. long-term interest rates are higher than short-term interest rates.
B. there is no risk premium for longer-term maturities.
C. short-term interest rates are expected to remain constant.
D. short-term interest rates are expected to decrease.
Answer: D
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Belize, a country in Central America, has a small coffee industry. Suppose Belize does not have free trade but it has comparative advantage in coffee production. If Belize allowed international trade, what would be the gains from trade?
A) Belize coffee producers would gain from trade. B) Belize coffee consumers would gain from trade. C) Belize would gain tariff revenue from trade. D) All of these answers are gains from trade.
A good is path dependent when
A) it can only be used in one way. B) people who move location follow the path of people who moved before them. C) consumers get utility from consuming goods that others are consuming, such as restaurants. D) the first technology that was adopted has an advantage over a better technology that came later.