# Economics Practice MCQ Page 15

Multiple Choice questions for Economics in the sets of 10 each on one page with questions and answers. All sets are usefull in the preparation of subject tests for employment or admission.
Question: 1479   If the market interest rate rises from 10 percent to 12 percent,then the market price of a bond that pays 10 percent of its face value of \$1,000 each year forever will
1. fall from \$1,000 to \$833.
2. increase from \$1,000 to \$1,200.
3. remain at \$1,000.
4. fall from \$1,200 to \$1,000.
5. increase from \$833 to \$1,000.
Question: 1480   Which of the statement about junk bonds is correct?
1. Their default rate is approximately 30 percent.
2. They pay,on average ,more than an investor could earn in the stock market.
3. They paid for the" merger-mania "of the 1980s.
4. The higher return is due to higher risk .
Question: 1482   Which of the following would be most likely to result from an increase in the interest rate?
2. Firms increase new plant construction.
3. More workers quit and go back to college
4. Households substitutes future for current consumption.
5. Firms substitute capital for labor.
Question: 1483   A capital good that produces for only year,has a marginal revenue product of \$1,000 for that year,and costs \$800,has a rate of return of
1. 8 percent.
2. 10 percent.
3. 25 percent.
4. 12.5 percent.
5. 20 percent.
Question: 1485   A piece of improved land that has a marginal revenue product of \$10,000 per year in perpetuity and that costs \$50,000 has a rate of return of
1. 50 percent .
2. 20 percent.
3. 25 percent.
4. 5 percent.
5. 10 percent.
Question: 1486   An increase in the market rate of interest causes the rate of return on any specific capital project to
1. increase .
2. decrease.
3. change unpredictably.
4. increase by exactly the same amount.
5. not change.
Question: 1487   In equilibrium , firms will undertake those investment projects that have
1. rate of return greater than the interest rate.
2. positive rates of return.
3. rates of return less the interest rate.
4. marginal revenue product greater than the interest rate.
5. marginal revenue product greater than their cost.
Question: 1489   An increase in the anticipated rate of inflation will cause the nominal interest rate to
1. increase by more than the change in the inflation rate.
2. increase by the same amount as the change in the inflation rate.
3. increase by less than the change in the inflation rate.
4. stay the same .
5. decrease.
Question: 1491   An increase in the anticipated rate of inflation will cause the real interest rate to
1. increase by more than the change in the inflation.
2. increase by the same amount as the change in the inflation rate.
3. increase by less than the change in the inflation.
4. stay the same.
5. decrease.
Question: 1492   If the nominal interest rate is 11 percent the real rate is 6 percent ,then the expected rate of inflation is
1. 11 percent.
2. 6 percent.
3. 5 percent.
4. -5 percent.
5. impossible to determined from the data given.
Question: 1494   A bond's interest rate would be higher if
1. it has a low liquidity.
2. it has low liquidity .
3. there is low inflation.
4. it has a long time to maturity.
5. it has a short time to maturity.
Question: 1495   If interest rates are expected to rise in the future then
1. the long-term interest rate will be higher than the short -term rate.
2. long-term and short-term rate will be about equal .
3. the short-term interest rate will be higher than the long-term rate.
4. no one will buy long-term bonds.
5. no one will buy short-term bonds.