Suppose that Emily opens a restaurant. She receives a loan from a bank for $200,000 . She withdraws $100,000 from her personal savings account. The interest rate on the loan is 6%, and the interest rate on her savings account is 2%. Emily's annual explicit cost of capital is
a. $2,000.
b. $4,000.
c. $12,000.
d. $14,000.
c
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The long-run aggregate supply curve is vertical at $10 trillion, but the short-run aggregate supply curve intersects the aggregate demand curve at $12 trillion. From this, we know that
A) the economy is operating below full capacity in the short run, and will have to adjust by hiring more workers, thus reducing unemployment. B) the price level is too high. The only way long-run equilibrium can be restored is to lower the price level. C) adjustments will have to occur so that the long-run aggregate supply equals $12 trillion. D) adjustments will have to occur so that the short-run aggregate supply intersects the aggregate demand curve at $10 trillion.
In general, as individuals undertake additional years of schooling,
A) their stock of human capital increases. B) the marginal productivity of individuals as workers declines. C) the marginal benefit to society of the extra years of education increases. D) the marginal productivity of individuals as workers becomes negative.
The notion that "no man produces but with a view to consume or sell,"
A. sums up Say's Law. B. can be restated as "supply creates it own demand". C. was said by David Ricardo, elaborating on Say's Law. D. All of the choices are correct.
In a circular flow model consisting of the household sector, the business sector, product markets, and resource markets:
A. businesses are sellers of products. B. households are sellers of products. C. resource markets are sellers of products. D. households are buyers of productive resources.