Why is the interest rate on U.S. Treasury securities lower than on other types of bonds?
What will be an ideal response?
The U.S. government is a low-risk borrower. By possessing the power to tax, the government can tap the wealth of the U.S. economy to pay back any bonds it sells. Thus few people doubt that the government will be able to repay its debt (despite the slight downgrading of U.S. debt by S&P that occurred in the summer of 2011). According to the risk-return principle, lower-risk investments will produce a lower rate of return (lower interest rate).
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Most students attending college pay tuition and are unable to hold a full-time job. For these students, tuition is
A) part of the opportunity cost of going to college. So are their forgone earnings from not holding a full-time job. B) part of the opportunity cost of going to college. Their forgone earnings from not holding a full-time job are not part of the opportunity cost of attending college. C) not part of the opportunity cost of going to college, but their forgone earnings from not holding a full-time job are part of the opportunity cost of attending college. D) not part of the opportunity cost of going to college. Neither are their forgone earnings from not holding a full-time job.
If the demand for a good is perfectly inelastic, what will happen to the quantity demanded if there is a tiny increase in price?
a. quantity demanded will increase proportionately b. quantity demanded will fall to zero c. quantity demanded will decrease proportionately d. quantity demanded will remain the same