EC102 Quiz 3
Elena Quercioli
March 12th, 2008
On this day in
1876
,
Alexander Graham Bell
successfully speaks the first
words on a telephone by calling for his assistant: “Mr. Watson, come here!”
(His second words were: “My bill is THAT much? No way!”)
Clearly
indicate a first choice and a second choice. If your first choice is
right, you get 7 points. If your second choice is right, you get 2 points. If
both are wrong, you get 0. If you are unsure, guessing is your best option.
1) Suppose that the real return on assets is 4% forever. Approximately what
is it worth to have a gift from your grandparents when you are young
that pays $2000 a year until you die:
a.
About $2,000
b.
About $5,000;
c.
About $120,000 if you expect to live for another 60 years;
d.
About $20,000
e.
About $8,000
f.
About $50,000
Solution:
The present value of the sum of all money to be received in the
future on this “perpetuity” is given by $2,000 / 0.04 = $50,000
2) According to the Beveridge curve, what are possible values for x,y
below?
Vacancy rate
5%
7%
9%
11%
Unemployment rate
x%
11%
8%
Y%

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