Investment occurs when:
a. firms are very profitable and have lots of extra cash on hand.
b. there is a reduction in risk-aversion.
c. the expected real interest rate is less than the expected real return on the investment project.
d. individuals realize that there are greater long-term gains in the equity and credit markets.
Ans: c. the expected real interest rate is less than the expected real return on the investment project.
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If the accounting profit equals $200,000 and implicit costs equal $40,000, the economic profit equals
a. $240,000. b. $200,000. c. $160,000. d. $40,000.
The referendum version of the median voter model concludes that _____
a. by decreasing output slowly, the median voter will adjust her preferences to those of the ballot organizer b. by increasing output slowly, the median voter will adjust her preferences to those of the ballot organizer c. the outcome preferred by the median voter will be chosen by unanimity d. the outcome preferred by the median voter will be chosen by majority rule
In a monopolistically competitive market, social welfare would be enhanced if
a. price equaled marginal cost. b. government regulation eliminated the product-variety externality. c. the government raised taxes to subsidize firms that price below average total cost. d. there were fewer firms, making the industry closer to an oligopoly.
If a union limits its size to the number of employed members it had when the union was first formed, over time there will be
A) an increase in the supply of union labor. B) falling wages as demand for workers increases. C) rising wages as demand for workers increases and the supply increases proportionally. D) rising wages as demand for workers increases but some potential workers are denied a place in the union.