Practice Questions

If a one-year project costs $100,000 and is expected to return the firm $105,000, the rate of return on the project is:

a. 4.8%.
b. 5%.
c. $5,000.
d. $105,000.
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Terms in this set (11)
Assume a closed economy with no government and a fixed aggregate price level and constant interest rate.
Furthermore, assume that the country's consumption function is C = 200 + 0.75YD, where YD is disposable income, and C is consumption, and that planned investment is $75.
If real GDP is $900:

a. planned investment equals $900.
b. unplanned inventory investment is negative.
c. autonomous consumption equals $900.
d. the economy is in income-expenditure equilibrium.
(Figure: The Market for Loanable Funds II) Use Figure: The Market for Loanable Funds II. Other things being equal, if the interest rate rises above 6%, _____ quantity of loanable funds will be demanded. (r* =6% Q*=500) a. the same b. a larger c. a smaller d. at first a smaller and then a largerc. a smaller