You have won the lottery. There are two payment options for you. The first option is a lump sum payment of $10 million that you will receive immediately. The second option is an annual payment of $1 million for each of the next 12 years. Assume there is
no inflation. How would you make a decision between the two options?
What will be an ideal response?
You need to compare the present values of the two payment options and select the option with the higher present value. The present value of the lump sum payment is $10 million, but the total present value of the scheduled payments depends on the interest rate that you would use to discount the future payments back to present value.
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In the interest-rate-based transmission mechanism, a decrease in the money supply will
A) reduce investment, shift the aggregate demand function inward, and lower real Gross Domestic Product (GDP). B) reduce the rate of interest and the level of investment. C) increase the price level. D) shift the aggregate supply function inward and increase real Gross Domestic Product (GDP).
Which of the following is correct for a single-price monopoly?
i. The firm can determine the quantity it produces and the price it charges. ii. It would never profitably produce output in the inelastic range of its demand. iii. Its marginal revenue is less than price. A) i only B) i and iii C) ii only D) ii and iii E) i, ii, and iii
Andrew is not working, but is available and willing to work after finishing a month-long mission trip for his church. While on his mission, Andrew did not look for work. Andrew is considered
A) unemployed. B) part of the labor force. C) a marginally attached worker. D) a discouraged worker. E) Both answers A and B are correct.
A perfectly inelastic supply curve
a. cannot exist b. is horizontal c. has an elasticity of 0 d. has an elasticity of 1 e. is vertical