An energy company has recently discovered a natural gas reserve. The company can tap this reserve at a cost of $350,000 and obtain a profit of $450,000 in three years. The current market rate is 15 percent. Should the company make the investment?
A. Yes, the future value of the profit is greater than the present value of the cost
B. No, the future value of the profit is less than the present value of the cost
C. Yes, the present value of the profit is greater than the present value of the cost
D. No, the present value of the profit is less than the present value of the cost
D. No, the present value of the profit is less than the present value of the cost
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Starting from long-run equilibrium, a large increase in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; higher; potential B. recessionary; higher; potential C. recessionary; lower; lower D. expansionary; higher; higher
John Maynard Keynes's contribution to our understanding of the economy was to show that an economy can be in equilibrium with high levels of unemployment
Indicate whether the statement is true or false
A firm that produces a good with many substitutes will most likely find that:
A. lowering its price will increase total revenue. B. raising its price will increase total revenue. C. lowering its price will decrease total revenue. D. lowering its price will not affect total revenue.
Which of the following is a valid concern about federal budget deficits?
A. The welfare of future generations will be directly related to the per-capita size of the national debt that they inherit. B. Growth of the national debt will eventually lead to the bankruptcy of the government. C. When the debt comes due, future generations may be unable to pay it off. D. If the increases in the national debt reduce private expenditures on capital formation, aggregate demand is reduced.