Exam 30: Interest, Rent, and Profit

What is the approximate value of a future income stream of three $1,000 payments to be received one,two,and three years from today if the interest rate is 5 percent?

Exhibit 30-2 -Refer to Exhibit 30-2.The interest and interest rate for loan 3 are,respectively,

An artificial rent is an economic rent that would not exist without government.

The demand curve for loanable funds is

The supply of loanable funds curve is

The difference between artificial rents and real rents is that

What is the approximate present value of $500 four years from now if the interest rate is 2 percent?

As interest rates increase,present values __________,and firms will buy __________ capital goods.

If the nominal interest rate is 12 percent and expected inflation rate is 9 percent,the real interest rate equals

The return on capital is greater than the price of a loanable fund.It follows that firms will

John is willing to give up 2 apples tomorrow to get one apple today,whereas Bill is willing to give up only 1.5 apples tomorrow to get one apple today.It follows that

If the demand for living in and visiting New York City were to decrease,then the following would happen in this order:

The upward-sloping supply of loanable funds curve assumes that

In what sense are profit and loss signals?

The present value of $1,000 one year in the future at a 4.5 percent interest rate is approximately

Which of the following is true?

Which of the following is a theory of the source of profit?

Mario earns profits by developing a product that is unusual,unique,and greatly in demand.Which of the following theories of profit best describes the reason behind his success?

Suppose you are thinking about buying a car. The market price of the car (including all associated taxes and fees)is $18,200 which you will pay for in cash if you buy the car. You anticipate that you will receive $3,000 (above and beyond any costs associated with running and maintaining the car)worth of services from the car each year for the next eight years,after which time the car will be scrapped and will have no scrap value. If the interest rate is 6%,determine if the present value of the car is more than,less than,or equal to the market value of the car and specify whether or not it makes economic sense to purchase this car. Does the interest rate need to rise or fall in order for you to reach the opposite conclusion about buying the car? Explain your answer and support it using present value calculations.

The supply of factor X is perfectly inelastic and it receives a price of $100.It follows that