Economic profit equals
A) NOPAT less capital charges.
B) NOPAT plus capital charges.
C) NOPAT plus interest payments on bonds.
D) NOPAT minus accounting profit.
A
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If an economy is in a recession and the government opts for an expansionary fiscal policy to shift the AD curve closer to the potential output, a sound finance economist with a Classical view, who holds the Ricardian equivalence theorem to be practically true, would conclude that the AD curve:
A. does not shift since the higher government spending is offset by higher private consumption. B. does not shift since the higher government spending is offset by lower private consumption. C. shifts to the left due to higher government spending. D. shifts to the right due to higher government spending.
ABC Corp. is considering an investment project that costs $500 today. It expects the project will yield income of $200 at the end of years 1, 2, and 3. The interest rate must be ________ for the firm to undertake the project.
A. at least 11% B. exactly equal to 10% C. no more than 9% D. It is indeterminate from the given information.
Another term for "don't put all your eggs in one basket" is
A) moral hazard. B) indirect finance. C) asymmetric information. D) portfolio diversification.
Output per worker is 50, the saving rate is 15 percent, the population is growing at one percent, depreciation is 9 percent, and the capital-labor ratio is 80. Consumption per worker is ________
A) 37.5 B) falling C) 75 D) 68