How does a reduction in the money supply by the Fed make owning stocks less attractive?
The reduction in the money supply raises the interest rate. So the return on bonds increases relative to the return on stocks. The increase in the interest rate also causes spending to fall, so that revenues and profits fall, making shares of ownership in corporations less valuable.
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You have just purchased 100 shares of the stock of Microsoft Corporation. This places you in the role of
A) principal. B) incentive system operator. C) agent. D) long-term contractor.
Suppose that the price of capital falls. Does this necessarily imply that the demand for laborwill fall? Explain
What will be an ideal response?
Assume that a college student spends her income on mac-n-cheese and CDs. The price of one box of mac-n-cheese is $1, and the price of one CD is $12 . If she has $200 of income, she could choose to consume
a. 30 boxes of mac-n-cheese and 12 CDs. b. 40 boxes of mac-n-cheese and 14 CDs. c. 20 boxes of mac-n-cheese and 16 CDs. d. 60 boxes of mac-n-cheese and 12 CDs.
Stan owns a software design business. He obtained a bank loan to buy computer equipment for his business. He pays $1,000 per month for interest on the loan. He has 10 employees, each of whom is paid $4,000 per month. Because his business has been
successful, next month he will increase employee wages to $5,000. If the revenue from his business remains at its current level, Stan is considering an addition to his office. Which of the following statements regarding Stan's business is false? A) The payments Stan makes to his employees are variable costs and explicit costs. B) The monthly payment Stan makes for his bank loan is an implicit cost. C) The monthly payment Stan makes for his bank loan is a fixed cost. D) The addition Stan is considering to make to his office would be an implicit cost.