How is the concept of present value useful in deciding whether or not to undertake an investment project?
What will be an ideal response?
If the present value of the income stream associated with an investment is less than the full cost of the investment project, the investment should not be undertaken. If the present value of the income stream is greater than or equal to the full cost of the investment project, it should be undertaken.
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Economic growth as it is currently measured
A. does not account for how increased per capita income is distributed across income groups. B. understates actual economic growth since it does not adjust for changes in leisure. C. does not consider? spiritual, cultural or social difficulties that may arise from growth. D. All of the above.
Time inconsistency is a problem when policymakers
a. have no flexibility in setting policy. b. follow inflexible rules. c. have discretion in their policy responses to changes in economic conditions. d. does not follow the Taylor rule. e. none of the above.
The more sensitive people are to a change in price, the
A) greater a change in price must be to induce a certain change in quantity demanded. B) greater is the price elasticity of demand. C) smaller the price elasticity of demand. D) closer the price elasticity of demand is to one.
A key feature of the 2003 tax reform was
a. the creation of an estate tax b. reduction of the tax rate on dividends and capital gains c. eliminating the capital gains tax d. eliminating tax exemptions e. increasing tax deductions for corporate expenditures on entertainment