Ally owns a shoe store. The market wage is $10 per hour, and the cost of capital is $2 per week for every $1000, of capital borrowed. Consider the isocost line associated with spending $8000, per week, and let the y-axis be the amount of capital borrowed in increments of $1000. Which of the following is not true?
A. If Ally employs 600 hours of work, she can borrow $1 million of capital.
B. If Ally employs 400 hours of work, she can borrow $3 million of capital.
C. The slope of the isocost line is ?5.
D. If Ally borrows no capital, she can employ 800 hours of work.
E. If Ally employs no workers, she can borrow $4 million of capital.
Answer: B
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The ________ the portion of your income spent on a good, the ________ is your demand for the good
A) larger; more income elastic B) larger; more price elastic C) smaller; less price elastic D) smaller; more income elastic
Consumption expenditures decrease when ________
A) the real interest rate falls B) disposable income increases C) autonomous consumption increases D) all of the above E) none of the above
What is the basic task that economists expect the market to carry out?
a. deal with the fundamental problem of scarcity b. balance the government's budget c. lessen wants to the level of income available d. meet all human wants
Consider the following (hypothetical) cash economy with no banks. The money supply consists entirely of $1000 in currency. Output is currently at potential. The government is currently faced with a $100 budget deficit and chooses not to raise taxes, but instead prints $100 more currency with which to balance its budget. The long run result is likely to be
a) an interest rate of 10% b) an inflation rate of 10% c) a 10% increase in the velocity of money d) a 10% growth rate of real GDP e) a 10% increase in the national debt