ECN 8HW

PART I: SHORT RESPONSE

Directions: Please provide detailed and elaborate responses to the following questions.  Your responses should be a minimum of 1 to 2 paragraphs and should include examples from the reading assignments or personal experience, if possible.

1.      Would you consider becoming a payday lender?  List the reason why you would and why you would not.

2.      As a financial officer of a large corporation, you find that the company has been underpaying the Internal Revenue Service by tens of millions of dollars a year. As a whistle blower, you will probably receive a payment of $10 million within a few years. If a large investor offers to pay you a substantial amount of money today in exchange for your future award from the IRS, what would be the minimum amount for which you would settle? Explain how you arrived at that figure.

3.      Are prices high because rents are high, or are rents high because prices are high? Use an example to illustrate your answer.

4.      What are usury laws? Why do economists hate them?

5.      Explain why a dollar today is worth more than a dollar you will have in the future.

6.      Why is the supply of loanable funds upward sloping? Why is the demand for loanable funds downward sloping?

7.      Outline the main theories of profits.  Which one(s) do you subscribe to?

PART II: JOURNAL ACTIVITY

Web Field Trip

Directions: Please visit the following website:

• CNN Money

Then answer the question below.  Please provide detailed and elaborate responses and ensure that your responses are a minimum of 100 words each and include examples from the reading assignments or personal experience, if possible.

1. Which were the five most profitable corporations in 2011, and how much profit did each of them earn?
   

    

   Lecture Notes are below.
   

    

   Rent, Interest, and Profit

   Many of the terms encountered in this module should be familiar, such as land, rent, profit, interest rate, and capital.  This module introduces algebraic formulas that are more complex than in previous material.  Please be sure to review these formulas carefully.

   Required Videos:

   Please review the following videos:

   • Rent Control and Deadweight Loss
   • Minimum Wage and Price Floors
   • Taxation and Dead Weight Loss
   • Taxes and Perfectly Inelastic Demand
   • Taxes and Perfectly Elastic Demand
   • Mortgage Interest Rates
   • Interest as Rent for Money
   • Money Supply and Demand Impacting Interest Rates

   Required Articles:

   Please review the following articles:

   • Bilych, G. (2012). Profit and Economic Growth. Business & Economic Research (BER), 2(2), 68-92. doi:10.5296/ber.v2i2.2285.
   • Paterson, J. S., & Valencia, A. (2011). The Effects of Recurring and Nonrecurring Tax, Audit-Related, and Other Nonaudit Services on Auditor Independence. Contemporary Accounting Research, 28(5), 1510-1536. doi:10.1111/j.1911-3846.2010.01060.x.
   • Eaton, B., Eswaran, M., & Oxoby, R. J. (2011). 'Us' and 'Them': the origin of identity, and its economic implications. Canadian Journal Of Economics, 44(3), 719-748. doi:10.1111/j.1540-5982.2011.01652.x.
   • Chernenko, S., & Faulkender, M. (2011). The Two Sides of Derivatives Usage: Hedging and Speculating with Interest Rate Swaps. Journal Of Financial & Quantitative Analysis, 46(6), 1727-1754. doi:10.1017/S0022109011000391.
   • Konadu-Adjei, C., Mayer, R. W., & Chien, W. (2012). Determinants Of Long-Term Interest Rates In The United States. Journal Of Business & Economics Research, 10(5), 257-267.

   Required Presentation:

   Please click on the link below to view the chapter presentation:

   • Chapter 17
    
    
    

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