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ECN 200 Test 2A

Economics - Elasticity and interest

Nominal interest rate the advertised rate of interest
market risk the risk that market value of an asset will change in an unanticipated way
real interest rate interest rate after inflation expectations are considered
default risk credit risk: the risk to the investor that the borrower won't pay
present value the interest adjusted value of future payments
yield curve the relationship between the rate of return earned on an investment and the length of time until the investment matures
deadweight loss loss in societal welfare associated with production being too little or too great
inelastic condition of demand where the percentage change in quantity is smaller than the percentage change in price
elasticity the responsiveness of quantity to changes in price
perfectly inelastic condition of demand where price changes have no effect on quantity
exclusivity degree to which consumption of a good can be restricted by a seller to only those who pay for it
unit elastic condition of demand where the percentage change in quantity is exactly equal to the percentage change in price.
consumer surplus the value you get that's greater than what you paid for it; the value the consumer places on a good that's over the amount they pay for it
market failure circumstance where the market outcome is not the economically efficient outcome
producer surplus the money the firm gets that's greater than what you paid for it; the money the firm gets for a good that's over the amount they are willing to sell it for
total expenditure rule if price and the amount you spend both go in the same direction, then demand is inelastic; if they go in opposite directions, then demand is elastic.
rivalry the degree to which one person's consumption reduces the value of the good for the next person
income elasticity of demand the responsiveness of quantity demanded of one good to a change in income
Write the formula for present value PV=FV/(1+r)^n
In a supply and demand model for money, we typically use the ___ to look at the savers' behavior. supply curve
In a supply and demand model for money, we typically use the ___ to look at the borrowers' behavior. demand curve
If people (who used to neither borrow nor save) are now saving for their retirement, then this will cause ___ the equilibrium interest rate to rise
When evaluating whether or not to make an investment, one should focus on the ____ because doing so takes into account anticipated inflation. real interest rate
In the market for loanable money, an increase in the profitability of investments overall will be revealed in___ an increase in the demand for loanable money
If the inflation rate is 3% and the real interest rate is 4%, then the nominal interest rate is ___ 7%
When evaluating a business decision, an economist will often resort to the use of present value because___ The investment occurs in one time period and the profits in another
If the interest rate is positive, the present value of $1000 to be received in ten years is Less than $1000
In the market for money, the demand curve is downward sloping because___ the demand curve represents the borrower who will borrow less at a higher interest rates
Explain ceteris paribus (other things equal) interest rates are lower for loans that are less risky than those that are more risky
A good that has few substitutes and takes up little income to purchase would have a ______ demand Inelastic
If the price rises and the total amount consumers spend on the good falls, then demand must be____ elastic
An increase in supply will decrease prices least when demand is ___ elastic
Name brand apparel have many substitutes and can get very expensive, as a result their demand is likely to be ____ elastic
When minor changes in supply seem to cause dramatic changes in price, you would conclude ____ Demand is inelastic
Which of the following indicates the demand for a product is inelastic the good is a small proportion of one's income
Economists suggest that a market can fail if ___ production or consumption can harm an innocent third party
Created by: dellisari