Economics is the study of rational choice under conditions of scarcity.
Scarcity the imbalance between the amount fo something that people want
and the amount that is freely available
Rational choice a calculated, self-interested decision
1. _ is calculated by adding back noncash expenses to net income and adjusting for changes in
current assets and liabilities.
a. Total cash flow
b. Capital spending
c. Net working capital
d. Cash flow from operations
e. Cash flow to creditors
At lower interest rates, the opportunity cost of holding money versus other
(interest-bearing) assets is lower, and thus the quantity demanded increases. As the graph
shows, an increase in the money supply (MS1 to MS2) will decrease the short-term