Question

1. Which of the following is not one of the four fundamental factors affecting the cost of money?
   1. Production opportunities
   2. Time preferences for consumption
   3. Risk
   4. Local government taxes

2. Risk represents the probability that an investment will generate a low or negative return in a financial market (TRUE/FALSE)?_____________________

3. Inflation  tends to push  the prices of goods and services downward (TRUE/FALSE)?

4. Suppose your friend chooses to spend $4,500 out of her current income of $10,000 and save the rest with a bank hoping to earn interest. The interest rate your friend can hope to earn from the bank will depend on which of the following?
   1. Savers’ time preferences for current versus future consumption
   2. The expected future rate of inflation
   3. A and B above
   4. B above only

Answer 1

Q1:

Option D: local government taxes;

--- the four factors affecting cost of money are production oppurtunities, time preference for consumption, risk and inflation

Q2:

True: Risk is defined as probability of loosing value of asset or getting negative returns

Q3:

False: Inflations pushes the prices upwards

Q4:

option C;