______ is the expenditure needed to construct a building of equal utility to the existing building.
Fill in the blank(s) with the appropriate word(s).
Ans: Replacement cost
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In the case where money demand is completely interest insensitive (interest elasticity equals zero), an increase in the quantity of money will
a. increase income but leave the interest rate unchanged. b. increase income and lower the interest rate. c. lower the interest rate but leave income unchanged. d. leave both income and the interest rate unchanged.
Richard receives government transfer payments and currently consumes 5 guns and 6 goose livers. Assume the price of guns decreases by 10% and the price of goose liver increases by 20%
The government raises Richard's transfer payments so he can still afford 5 guns and 6 goose livers. Does this constitute a true cost-of-living adjustment (COLA)? A) No. Richard is overcompensated. B) No. Richard is undercompensated. C) Yes. The payment just achieves the right level of compensation. D) Not enough information.