Capital gains are ________, and capital losses are ________.
A. increases in the flow of investment; decreases in the flow of investment
B. additions to plant and equipment; the destruction of plant and equipment
C. increases in the flow of saving; decreases in the flow of saving
D. increases in the value of existing assets; decreases in the value of existing assets
Answer: D
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When an asset enables people to transfer purchasing power into the future it serves the function of a ________
A) store of value B) unit of account C) means of deferred payment D) medium of exchange
A corporation has been steadily losing money on one of its product lines, plastic flamingo lawn ornaments. The firm produces plastic flamingos in a factory that cost $20 million to build 10 years ago. The firm is now considering an offer to buy that factory for $15 million. Which of the following statements about the decision to sell or not to sell is correct?
a. The firm should turn down the purchase offer because the factory cost more than $15 million to build. b. The $20 million spent on the factory is a sunk cost; that cost should not affect the decision. c. The $20 million spent on the factory is an implicit cost, which should be included in the decision. d. The firm should sell the factory only if it can reduce its costs elsewhere by $5 million.
Consider three imaginary countries. In Aire, saving amounts to $4,000 and consumption amounts to $12,000; in Bovina, saving amounts to $3,000 and consumption amounts to $24,000; and in Cartar, saving amounts to $10,000 and consumption amounts to $50,000 . The saving rate is
a. higher in Aire than in Cartar, and it is higher in Cartar than in Bovina. b. higher in Cartar than in Aire, and it is higher in Aire than in Bovina. c. higher in Cartar than in Bovina, and it is the same in Bovina and Aire. d. higher in Aire than in Bovina, and it is the same in Aire and Cartar.
Which of the following is not true concerning a currency bailout?
A. It can help avoid a domino effect of depreciating currencies in other economies. B. It occurs when money is lent to an economy to increase or maintain the value of its currency. C. The expectation of a bailout can encourage policies that lead to a currency crisis. D. The International Monetary Fund will bail out any nation with a devaluing currency.