Jenny Spends 32 Hours a Week, 50 Weeks a Year

question 102

Multiple Choice

Jenny spends 32 hours a week, 50 weeks a year, operating a DVD rental store that she owns.She also owns a music store in another city that is operated by a full-time employee.Jenny spends 140 hours per year working at the music store.She elects not to group them together as a single activity under the "appropriate economic unit" standard.

• A)Neither store is a passive activity.
• B)Both stores are passive activities.
• C)Only the DVD rental store is a passive activity.
• D)Only the music store is a passive activity.
• E)None of the above.

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Definitions:

Saving

The portion of income not spent on current consumption but rather set aside for future use.

Borrowing

The act of obtaining funds from another party with the promise to repay the principal amount along with interest or other charges.

Actual Inflation Rate

The percentage increase in the general price level of goods and services in an economy over a period of time, as measured by the consumer price index or other methods.

Real Rate

The real rate is the interest rate adjusted for inflation, providing a more accurate measure of the true return on an investment or the true cost of borrowing.