Fred Is Considering Consumption Between Two Periods and Is Earning

question 47

Multiple Choice

Fred is considering consumption between two periods and is earning an income of $1,000 in both periods.If the interest rate is 8 percent,Fred borrows $500,but if the interest rate rises to 18 percent,Fred saves $500.Is this behavior economically reasonable?

• A)No,Fred would borrow less because of the higher interest rate but would still borrow a positive amount.
• B)No,Fred might not borrow at all,but would not start saving.If Fred wanted to save he would have saved at the lower interest rate too.
• C)Yes,the change in interest rates will cause his endowment point to shift,allowing him to become a saver.
• D)Yes,the higher interest rate will raise the cost of current consumption,inducing him to cut back current consumption.He could cut back so much that he becomes a saver.

Understand the fiscal role of state and local governments versus the federal government.

Describe the administrative burden of tax systems and strategies to mitigate it.

Explain the benefits principle of taxation and its application.

Understand the historical trends in government revenue as a percentage of GDP in the U.S.

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Definitions:

Nonabsorbable Sutures

Surgical threads used to close wounds, which are not broken down by the body and may need to be removed later.

Collagen Fibers

Strong, flexible proteins that form the primary component of connective tissues in the body, providing structural support.

Sterile Dressing

A medical bandage or cover that is free from bacteria or other living microorganisms, used for protecting wounds.

Debridement

The removal of debris or dead tissue from a wound to expose healthy tissue.