Your friend Harry has quit his $20,000-a-year job to start a business that rents fishing boats. He asks you to lend him $50,000 and agrees to pay you a 10% return on your $50,000 if he earns a profit
During the first year Harry's total revenue is $120,000 and his total cost for equipment and supplies are $100,000 . Harry tells you that he cannot pay you any interest this year because he did not earn a profit. Is your friend Harry trying to cheat you?
The problem here is that profits are not strictly defined. Harry has made an accounting profit of $20,000, but an economic profit of zero. The $20,000 represents the opportunity cost of Harry's time running the business.
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Initially, the reserve ratio is 10 percent. Now banks decide they want an additional 10 percent of deposits as reserves. There are no currency drains. If the Fed buys $1 million of U.S. government securities, the money supply will
A) not change because of the excess reserves banks keep on hand. B) increase by $1 million. C) increase by $5 million. D) increase by $10 million.
An increase in the excise tax imposed upon consumers of gasoline
A. shifts the market price of gasoline. B. shifts the demand for gasoline to the right. C. shifts the demand for gasoline to the left. D. shifts the supply of gasoline to the right.
Suppose a plant has 1000 employees, half of whom are from a minority population. Suppose further that, in order to cut costs, a manager must layoff 100 employees. If she chooses only non-minority workers to lay off, because an analysis of productivity data suggests they are, on average, 5% less efficient then she is
A. using statistical discrimination and it is illegal. B. on perfectly sound legal ground. C. using statistical discrimination and it is legal. D. using inferential discrimination and it is illegal.
Refer to the diagram for a specific economy. The shape of this curve suggests that:
A. the price level rises at a diminishing rate as the level of aggregate demand increases.
B. full employment and price stability are compatible goals only when aggregate demand is
falling.
C. each successive unit of decline in the unemployment rate is accompanied by a smaller
increase in the rate of inflation.
D. each successive unit of decline in the unemployment rate is accompanied by a larger increase in the rate of inflation.