Which of the following tends to cause business investment in plant and equipment to decline?
an increase in corporate profits
higher real interest rates
lower real interest rates
optimistic expectations
higher real interest rates
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Public policies
a. may be able to improve either economic efficiency or equality. b. may be able to improve economic efficiency but cannot improve equality. c. may be able to improve equality but cannot improve economic efficiency. d. cannot improve either equality or economic efficiency.
Fifteen years ago your parents purchased some land with the idea of selling it later to help pay your college expenses. They purchased the land for $100,000 . They sold if for $180,000 . During the time they held it the price level rose from 80 to 120 . If your parents face a 25% tax rate, what was their real after-tax gain? (Hint: What's the real value of the land in current prices?)
Suppose an insurance company determines that the average annual malpractice cost is $10,000 for reckless lawyers and $500 for careful lawyers. If 10% of the lawyers insured by the company are reckless, the company will earn zero economic profit if the price of insurance is:
A. $500. B. $1,450. C. $5,250. D. $10,000.
Which of the following bank-related policies of the Fed fosters huge moral hazard problems:
A. Printing of paper currency for banks to distribute B. Too-big-to-fail policy C. Check-clearing and deposit transfers D. Providing banking services to governments