Project P requires an investment of 4000 at time 0. The investment pays 2000 at time 1 and 4000 at time 2. Project Q requires an
investment of X at time 2. The investment pays 2000 at time 0 and 4000 at time 1. The net present values of the two projects are equal at an interest rate of 10%. Calculate X.
1 answer:
You might be interested in
Answer: A - nominal wages are slow to adjust to changing economic conditions
Explanation:
In the short run, the costs of many of the factors used in the production process are fixed. For example labours wage is fixed for a number of years because of labour contracts. Also the raw materials used in the production process have long term agreements that fix their prices.
As a result of factors of production been fixed in the short run, when general price level rises and the cost of production remains constant, profit also rises.
Firms take advantage of this rise in price and increase production and the quantity of aggregate supply increases. This is why the short run aggregate supply curve is upward sloping.
