Suppose the Kwik Print Company considers an investment project that involves the purchase of a copier with an expected output of $4,000 . If the firm has to borrow $3,000 and the rate of return is 11.1 percent, then the interest rate associated with the loan must be 20 percent
a. True
b. False
Indicate whether the statement is true or false
True
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Which of the following is NOT a basis for the Taylor-rule guideline for how the Federal Reserve should set its target value for the federal funds rate?
A) the current deviation of the actual inflation rate from the Fed's inflation objective B) the gap between actual real GDP and a measure of potential real GDP C) an estimated long-run real interest rate D) the present deviation of the actual unemployment rate from the Fed's unemployment objective
The Affordable Care Act is intended to reduce the price of health care. A decrease in the price of health care may
A) increase the number of doctors office visits if office visits are considered an inferior good and the substitution effect dominates the income effect. B) decrease the number of doctors office visits if office visits are considered an inferior good and the substitution effect dominates the income effect. C) increase the number of doctors office visits if office visits are a normal good. D) Both A and C.
Which of the following is NOT an example of consumer behavior consistent with the standard assumptions of microeconomic theory?
A) A concern for fairness can influence purchasing patterns. B) When demand increases, all else being equal, consumers expect price to rise. C) After a snowstorm, the demand for snow shovels increases. D) Snow shovels and snow plows are substitute goods. E) none of the above
Why would lowering its own interest rates affect a nation's exchange rate?
a. International interest arbitrage (the ability to borrow in low-rate markets and deposit in higher-rate markets) would cause investors to sell domestic currency assets and purchase foreign assets based in other currencies. b. A nation's central bank controls both interest rates and exchange rates. Unfortunately, they do not have sufficient funds to take care of both at the same time. c. When interest rates fall, borrowing is cheaper, spending and GDP rise and so do exports, thus causing the exchange rate to appreciate. d. In the short run, exchange rates have to adhere to PPP; otherwise, traders will make profits by purchasing in the cheap market and selling in the more expensive market, thus aligning exchange rates at the proper level