Suppose that you and two friends have an opportunity to purchase a pizza restaurant. Each of you would put up $75,000 . The revenue from the restaurant is expected to remain $200,000 per year for the next several years
The costs (not including the opportunity costs of your investment) of operating the restaurant are expected to remain steady at $185,000 for the next several years. The current market rate of interest is 7 percent per year. Should you go in on this deal? Explain.
The expected profit from the restaurant is $15,000 per year. If the profits are divided equally among the three partners, this amounts to $5,000 per year. This is a 6.67 percent rate of return on the initial $75,000 investment. Since the expected rate of return is less than the market rate of interest, you should not go in on the deal.
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As the LM curve becomes steeper, an unexpected decrease in consumer confidence
A) will cause a relatively large increase in output and relatively large increase in the interest rate. B) will cause a relatively small increase in output and relatively small increase in the interest rate. C) is more likely to cause stock prices to rise. D) is more likely to cause stock prices to fall.