Tom?s Donuts can invest in a new espresso machine that costs $500 and will yield expected profits of $350 each year for two years. At higher interest rates, the present discounted value of profits from the investment
A. is unchanged.
B. increases.
C. decreases.
D. is indeterminate from the given information.
Answer: C
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Which of the following is a valid statement?
a. Required reserve ratio = required reserves as a percentage to total deposits. b. Required reserves = the maximum reserves required by the Fed. c. Excess reserves = total reserves plus required reserves. d. All of these.
Ricardian equivalence predicts:
A. that if governments cut taxes but not spending, people will not change their behavior. B. if people perceive current tax cuts to mean higher tax payments in the future, the cuts will have little expansionary effect. C. the consumers need to feel as though they will not have to pay in the future for current spending to make current tax cuts effective expansionary policy. D. All of these are true.
In the 1970s and 1980s, savings banks invented NOW accounts to get around financial regulations. This is an example of:
A. quantitative easing. B. a moral hazard problem. C. deleveraging. D. the law of diminishing control.
Suppose you have a choice between studying one more hour for your history exam or studying one more hour for your psychology exam. Your decision on what to study should be based on:
a) the additional benefits of studying for each class. b) which class you like the most. c) how much time you have already studied for each class. d) your current average scores in each class.