The wealth effect helps explain the slope of the aggregate-demand curve. This effect is
a. relatively important in the United States because expenditures on consumer durables is very responsive to changes in wealth.
b. relatively important in the United States because consumption spending is a large part of GDP.
c. relatively unimportant in the United States because money holdings are a small part of consumer wealth.
d. relatively unimportant because it takes a large change in wealth to cause a significant change in interest rates.
c
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Which of the following situations depicts diseconomies of scale?
A) The average total cost of a firm increases from $50 to $55 when it increases its production from 10 units to 20 units. B) The average total cost of a firm decreases from $50 to $40 when it increases its production from 10 units to 20 units. C) The average total cost of a firm remains at $50 when it increases its production from 10 units to 20 units. D) The average total cost of a firm remains at $50 when it decreases its production from 20 units to 10 units.
Which of the following statements is true?
A) The more liquid the bond, the lower the yield. B) Tax-free bonds normally have a higher interest rate than other types of bonds. C) The price of a bond increases as it becomes more risky. D) The yield curve illustrates the relative default risks of alternative types of bonds.
This is a two-part question: We have a firm that needs $1000 to obtain a new machine for its business. It can either issue stock or bonds, or some combination of both. If it issues bonds it will have to pay $8.00 in interest for every $100 borrowed. Finally, assume the company will earn $150 in good years and $75 in bad years, with equal probability. The first part of the question is to (a) determine the payment to the equity holders under the following three scenarios: (i) the first is the firm uses 0% debt financing; (ii) the second is the firm uses 50% debt financing, and (iii) the third finds the firm using 80% debt financing. The second part of the question is to (b) determine the expected equity return (%) under each scenario.
What will be an ideal response?
Average total cost is
A. TFC + TVC. B. AFC/AVC. C. AFC - AVC. D. AFC + AVC.