Reported profits often are surprisingly high in a recession, when economic growth is low. The best explanation for this is: A.Annual profits are a one year snapshot, and when new corporate investment is low, there is not enough depreciation on new projects to offset profits on old projects. B.Corporations raise prices in bad times to make up for lost sales, leading to high profits. C.Corporate losses in bad times are used as write-offs, allowing corporations to avoid taxes and thus have high profits. D.All of the above are equally likely explanations.

Answered: Reported profits often are surprisingly…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Reported profits often are surprisingly high in a recession, when economic growth is low. The best explanation for this is:

Annual profits are a one year snapshot, and when new corporate investment is low, there is not enough depreciation on new projects to offset profits on old projects.

Corporations raise prices in bad times to make up for lost sales, leading to high profits.

Corporate losses in bad times are used as write-offs, allowing corporations to avoid taxes and thus have high profits.

All of the above are equally likely explanations.

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