If the economy is in a liquidity trap, then:
a. fiscal policy can still stimulate the economy through lower interest rates.
b. monetary policy cannot stimulate the economy by lowering interest rates.
c. the precautionary demand for money is falling.
d. all of the above.
B
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An investment carrying a current cost of $120,000 is going to generate $50,000 of revenue for each of the next three years. To calculate the internal rate of return we need to:
A. find the interest rate at which the present value of $150,000 for three years from now equals $120,000. B. find the interest rate at which the sum of the present values of $50,000 for each of the next three years equals $120,000. C. calculate the present value of each of the $50,000 payments and multiply these and set this equal to $120,000. D. subtract $120,000 from $150,000 and set this difference equal to the interest rate.
Demand is inelastic if
A. the percentage change in quantity demanded is greater than the percentage change in price. B. the elasticity of demand is less than 1. C. the demand for the good is sensitive to changes in price. D. more units will be purchased if the price increases.