1. Which of the following most is true of wealth?
a. It is a flow variable
b. Wealth is increased by depreciation and decreased by consumption
c. Wealth is the stock of all things owned by an individual including the market value of assets
such as a house, car, piece of land, machinery, other capital goods and debts the individual
owes.
d. Wealth is all the money a person owns
e. Wealth does not include the stock of knowledge, skills, behavioural attributes and personal
characteristics that determine an individual’s labour productivity.
2. Which of the following is true of borrowing?
a. When you repay a loan you pay less that then amount you borrowed, assuming positive
interest rates
b. When you take a loan you are forgoing consumption in the future and you should only do this
when the benefit of the forgone future consumption is less than the benefit of the
consumption in the future
c. You can borrow any amount you wish since we cannot predict how much one will earn in the
future
d. A higher interest rate makes borrowing more attractive,
e. The cost of borrowing is determined by the interest rate and the interest rate is the ratio of
the principal to the repayment amount
3. An individual who is impatient will:
a. Consume more in the future period and less in the present period than an individual who is
more patient
b. Be relatively more willing to borrow than an individual who is more patient
c. Consume more in the present and more in the future than an individual who is more patient
d. Have a steeper consumption constraint than an individual who is more patient
e. Consume their entire endowment in the present period.
, Questions 4 and 5 relate to the figure below:
H
4. Which is true of the utility of the individual’s consumption behaviour as represented in the
figure above?
a. Point E represents a point of higher utility than point F
b. Point G represents a point of higher utility than point E
c. Point G represents 73 utils of utility
d. Point F represents a point of higher utility than point E
e. Point F represents a point the same utility as point E
5. An individual who previously had to make use of a pay-day loan gains access to a credit card
with a higher interest rate. Which of the following options represents the change in the
interest rate that the individual would face?
a. The shift from constraint A to constraint B
b. The shift from point F to point E
c. The shift from point E to point G
d. The shift from constraint B to constraint A
e. The shift from point H on the y-axis to point G
6. If Ayanda wants to take a loan and have a repayment of R5000 next year. How much would
she be borrowing this year, if the interest rate was 6.5%?
a. R5000
b. R325
c. R4500
d. R5325
e. R4695
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