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The liquidity means how fast an instrument can be converted into cash. The liquidity of
these measures are in order M1>M2>M3>M4 i.e. M1 is most liquid and M4 is least
liquid.
The rule of 70 is a means of estimating the number of years it takes for an investment or
your money to double. The rule of 70 is a calculation to determine how many years it'll
take for your money to double given a specified rate of return. The rule is commonly used
to compare investments with different annual compound interest rates to quickly
determine how long it would take for an investment to grow. The rule of 70 is also
referred to as doubling time.
Rule of 70 Examples
1. If a country’s GDP is growing at 5% per year, how many years will it take for its GDP
to double? *
5
7
14
28
32
2. If Maria’s retirement account is doubling roughly every 11 years, what is the
approximate growth rate? *
2.4%
4.8%
6.4%
12.2%
14.8%
3. Suppose Country A and Country B start out with the same GDP. If Country A’s GDP
begins doubling every 5 years and Country B’s GDP begins doubling every 10 years, how
much larger is Country A’s GDP after 30 years? *
2 times larger
4 times larger
6 times larger
8 times larger
Cannot be determined
The Rule of 70
For example, if you hear that the population of your town is growing by 2% per year, that
means it will double in just 35 years! (70/2=35
FIAT وہ کاغذی نوٹ جو کسی سرکار کی جانب سے زر قانونی کے طور پر جاری کیے
MONEY گئے ہوں لیکن انھیں سکے میں نہ بدلہ جاسکتا ہو ۔
Fiat money or fiat currency is any money that the government declares as legal tender.
Also, this type of money is not backed by a physical commodity such as gold or silver. In
other words, fiat money has no intrinsic value. Market forces determine the value of
fiat money. E.g paper money and much coinage
The diamond-water paradox is the observation that those things that have the greatest
value in use often have little value
in exchange and those things that
have little value in use often have
the greatest value in exchange.
When an economist talks about utility, she is talking the satisfaction that results from
about the consumption of a good
A util is an artificial construct used as a means of satisfaction one receives from the
measuring the consumption of a good
Total utility is defined as the sum of the amounts of satisfaction
a person receives from consuming
a good
Marginal utility is defined as the change in total utility a person
derives from the consumption of a
good divided by the change in the
quantity of the good consumed
Suppose Will receives 150 utils from consuming one 100 utils
banana and 250 utils from consuming two bananas.
What is the marginal utility of the second banana?
Suppose you are eating slices of pizza and after your total utility is 25 utils, and
consuming the first slice you receive 14 utils of total the marginal utility of the third
utility, after the second you receive 22 utils of total slice is 3 utils
utility, and after the third 25 utils of total utility.
Then
Suppose you are eating buffalo wings at a local diminishing; assumed
happy hour. The total utils from doing so after the
fourth, fifth, sixth, and seventh wings are 30, 50, 65,
72, respectively. In this situation we have
__________ marginal utility, which is generally
__________ in the analysis of consumer choice.
The law of diminishing marginal utility can be stated B). As the amount of a good
as follows consumed increases, the
additional satisfaction gained
from consuming additional units
tends to decrease
and
D). As the amount of a good
consumed increases, the sum of
satisfaction received tends to
increase but at a diminishing rate
Suppose you just finished your third plateful of No way. You could get negative
Thanksgiving dinner and it yielded zero units of utility from the fourth plateful
additional satisfaction. Should you go back for
more?
Suppose the marginal utility (MU) of paperback No. You need to buy more books
books is 40 utils and each costs $5 while the MU of and rent fewer DVDs
DVD rentals is 20 utils and each rents for $4. If you
consume one movie and one book per week, are you
attaining consumer equilibrium?
Suppose for a consumer the marginal utility (MU) of more utility per dollar is gained
bread is 20 utils and the MU of milk is 10 utils; the from consuming milk than bread
price of bread is $3 and the price of milk is $1.
Given this,
If a person is receiving greater marginal utility per not maximizing utility
dollar from consuming one good than another, it
follows that he or she is
In order for an individual to achieve consumer MUA/PA = MUB/PB
equilibrium through the consumption of two goods,
A and B, that individual must fulfill the condition
A consumer is in equilibrium if he or she derives the marginal utility per dollar spent
same on each good consumed
Suppose a consumer is purchasing Coke and pretzels increase; decrease; increase
in quantities such that she is achieving consumer
equilibrium. Then the price of Coke decreases. The
consumer will likely __________ her consumption
of Coke and the marginal utility of Coke will
__________ while the total utility from Coke will
__________.
Joe is currently in consumer equilibrium by decrease; increase; increase;
consuming cheese and crackers, such that the last decrease
cracker consumed yielded 8 utils and the last piece
of cheese consumed yielded 12 utils. Assume the
price of crackers is two cents per cracker and the
price of cheese is three cents per piece. If the price
of crackers increases to four cents, Joe should
__________ his consumption of crackers and his
marginal utility from crackers will __________ and
also __________ his consumption of cheese and his
marginal utility from cheese will __________.
To an economist, utility refers to the satisfaction that results from the
consumption of a good
A. incomes fall.
B. income tax rates rise.
C. the general price level falls.
D. the unemployment rate increases.
A hurricane affects the production of sugar in many C. Rises Moves along the
of the main sugar producing areas in the USA and curve to the left
Central America. How would this be shown on a
demand and supply diagram?
A. $8 to $6
B. $6 to $4
C. $4 to $2
D. They are all the same value.
Supply of a product will tend to be more inelastic A. average costs of production
when rise quickly as price changes.
A. I only
B. I and II only
C. II and III only
D. I, II and Ill
In the diagram below, S1, S2 and S3 are supply D. all three curves is equal.
curves.
(screen shot question 11)
I. a fall in income
II. an increase in the price of a complement.
III. an increase in production costs.
A. I only
B. I and II only
C. II and III only
D. I, II, and III
14. Refer to the following table. D. 1.25
A. 0.5
B. 0.8
C. 1.0
D. 1.25
As a result of the price of apples falling from 50 C. +0. 5
cents per kilo to 40 cents per kilo, the quantity of
oranges demanded falls from 80 kilos a day to 72
kilos a day. The cross elasticity of demand between
apples and oranges is
A. - 2
B. - 0.5
C. +0. 5
D. +2
If the demand for tourists to visit the Riesenrad is A. increase the amount of revenue
price inelastic, then a policy of increasing the generated by the ride.
entrance price would
A. I only
B. I and II only
C. II and Ill only
D. I, II, and III
In the above diagram, the price of magazines B. An increase in production
changes fro P1 to P2 . Which of the following is the costs.
most likely cause?
(screen shot question 18)
A. A fall in demand.
B. An increase in production costs.
C. A fall in incomes.
D. An increase in magazine advertising.
A person's income rises from $50,000 per year to C. income elastic
$60,000 per year. As a result, her spending on
holidays rises from $3000 to $4500 per year. Her
income elasticity of demand for holidays is:
A. income inelastic
B.unit elastic
C. income elastic
D. positively cross elastic
The cross elasticity of demand for good X with A. goods X and Y are substitutes.
respect to good Y is +0.2. The cross elasticity
of/demand for good Y with respect to good X is
+1.5. This indicates that
A. 0
B. 0.5
C. 1
D. infinity
A consumer receives an increase in disposable B. 0.75
income from $20,000 per annum to $24,000 per
annum. As a result, the expenditure of the consumer
on foodstuffs increases from $6,000
per annum to $6,900 per annum. The consumer has
an income elasticity of demand for food of
A. 0.30
B. 0.75
C. 1.00
D.1.33
The diagram below shows a supply curve. D. inelastic
(screen shot question 23)
A infinity
B elastic
C. 1
D. inelastic
A positive value of cross elasticity of demand C. substitutes for each other
between two goods implies that they are
A. $500 to $550
B. $500 to $600
C. $500 to $1,000.
D. $500 to $5, 500.
The market demand equation for Good X is given by B. 23
A. 20
B. 23
C. 26
D. 30
The demand for a product with respect to a change C. it has few substitutes.
in its price will tend to be inelastic if
Blanchard Chapter 5