Suppose a bank has $10 million in capital, $100 million in assets, and after-tax profit of $2 million? what is its return on assets? What is its return on equity?
What will be an ideal response?
Its return on assets is after-tax profit/bank assets or $2 million/$100 million = 2%. Its return on equity is after-tax profits/bank capital or $2 million/$10 million = 20%.
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What is an appropriate definition for business cycles?
a. Business cycles reflect the flow of money between businesses, individuals, and the government. b. Business cycles are recurring, regular, and systematic movements in nominal economic activity around a long term trend. c. Business cycles are recurring, regular, and systematic movements in real economic activity around a long term trend. d. Business cycles are recurring, irregular, and unsystematic movements in real economic activity around a long term trend. e. None of the above.
When accounting profits are positive, economic profits
A) must be positive. B) will be negative. C) will equal zero. D) could be positive, negative or zero.