Filters
Question type
Study Flashcards

The profit rate of a firm that rents capital is equal to:


A) the marginal product of capital minus the cost of capital.
B) the cost of capital minus the marginal product of capital.
C) zero.
D) a negative number, if it is adding to its capital stock.

E) B) and D)
F) B) and C)

Correct Answer

verifed

verified

Use the following to answer questions : Exhibit: Residential Investment Use the following to answer questions : Exhibit: Residential Investment -(Exhibit: Residential Investment) Based on the graph, if the capital market is initially in equilibrium at A with the relative price of housing equal to P<sub>H3</sub>/P and the stock of housing capital equal to K<sub>H2</sub>, then holding other factors constant, an economic recession that reduces national income will cause the relative price of housing to move to ______ and the flow of residential housing to move to ______. A) P<sub>H1</sub>/P; I<sub>H4</sub> B) P<sub>H2</sub>/P; I<sub>H3</sub> C) P<sub>H3</sub>/P; I<sub>H2</sub> D) P<sub>H4</sub>/P; I<sub>H1</sub> -(Exhibit: Residential Investment) Based on the graph, if the capital market is initially in equilibrium at A with the relative price of housing equal to PH3/P and the stock of housing capital equal to KH2, then holding other factors constant, an economic recession that reduces national income will cause the relative price of housing to move to ______ and the flow of residential housing to move to ______.


A) PH1/P; IH4
B) PH2/P; IH3
C) PH3/P; IH2
D) PH4/P; IH1

E) B) and C)
F) B) and D)

Correct Answer

verifed

verified

In the mortgage market, a rise in the real interest rate:


A) lowers housing demand, housing prices, and residential investment.
B) raises housing demand, housing prices, and residential investment.
C) lowers housing demand and residential investment but raises housing prices.
D) raises housing demand but lowers housing prices and residential investment.

E) B) and D)
F) A) and C)

Correct Answer

verifed

verified

If firms are earning a profit, then this raises the ______ value of installed capital and implies a ______ value of Tobin's q.


A) market; low
B) market; high
C) replacement; low
D) replacement; high

E) None of the above
F) C) and D)

Correct Answer

verifed

verified

The link between the flow of new housing and the stock of existing housing is the:


A) relative price of housing.
B) demand for housing.
C) demand for residential investment.
D) real interest rate.

E) C) and D)
F) All of the above

Correct Answer

verifed

verified

Explain the relationship between the marginal product of capital and the total amount of capital. What decision should be made by production firms to maximize its profit?

Correct Answer

verifed

verified

The marginal product of capital declines...

View Answer

What are the two kinds of firms in the economy, as described by the neoclassical model?

Correct Answer

verifed

verified

There are two kinds of firms in the econ...

View Answer

Assume that the government levies a one-time-only tax on oil companies equal to a proportion of the value of the company's oil reserves. According to the neoclassical model, if firms face no financing constraints and also believe the tax will not be repeated, the effect of this tax on investment by these firms will be to:


A) decrease investment.
B) not affect investment.
C) increase investment.
D) decrease the rental price of capital but not change the cost of capital.

E) C) and D)
F) A) and C)

Correct Answer

verifed

verified

The inventories of a company that manufactures snow blowers increase in the summer and decline in the winter. This example is most consistent with which of the following explanations for holding inventories?


A) production smoothing
B) inventories as factors of production
C) stock-out avoidance
D) work in process

E) B) and C)
F) B) and D)

Correct Answer

verifed

verified

According to the efficient markets hypothesis, changes in stock prices are:


A) driven by irrational waves of optimism.
B) driven by irrational waves of pessimism.
C) rational reflections of underlying economic fundamentals.
D) possible to predict from available information.

E) B) and C)
F) None of the above

Correct Answer

verifed

verified

According to the neoclassical model of investment, business fixed investment does not depend on:


A) the realized profits of firms.
B) the marginal product of capital.
C) the interest rate.
D) tax rules affecting firms.

E) None of the above
F) A) and B)

Correct Answer

verifed

verified

The opportunity cost of holding inventories is the:


A) real interest rate.
B) nominal interest rate.
C) raw materials used up in the production of inventories.
D) labor used in the production of inventories.

E) A) and B)
F) None of the above

Correct Answer

verifed

verified

James Tobin reasoned that:


A) the stock market is a "random walk."
B) if the stock market values capital at less than its replacement cost, the stock market will go up.
C) if the stock market values capital at less than its replacement cost, the stock market will go down.
D) if the stock market values capital at less than its replacement cost, the firm's managers will not replace capital as it wears out.

E) A) and B)
F) A) and C)

Correct Answer

verifed

verified

According to the neoclassical model of investment, the immediate impact of a rise in the real interest rate will be to:


A) increase the cost of capital, the rental price of capital, and the rate of investment.
B) increase the cost of capital and the rental price of capital, but to lower the rate of investment.
C) increase the rental price of capital and the rate of investment, but to leave the cost of capital unchanged.
D) increase the cost of capital and lower the rate of investment, but to leave the rental price of capital unchanged.

E) A) and B)
F) A) and C)

Correct Answer

verifed

verified

The construction of a new apartment building is an example of:


A) business fixed investment.
B) residential investment.
C) inventory investment.
D) financial investment.

E) None of the above
F) A) and C)

Correct Answer

verifed

verified

Use the following to answer questions : Exhibit: Residential Investment Use the following to answer questions : Exhibit: Residential Investment -(Exhibit: Residential Investment) Based on the graph, if the capital market is initially in equilibrium at A with the relative price of housing equal to P<sub>H3</sub>/P and the stock of housing capital equal to K<sub>H2</sub>, then holding other factors constant, if a massive earthquake destroys a significant portion of the stock of housing capital, house prices will move to ______ and the flow of residential housing will move to______. A) P<sub>H1</sub>/P; I<sub>H4</sub> B) P<sub>H2</sub>/P; I<sub>H3</sub> C) P<sub>H3</sub>/P; I<sub>H2</sub> D) P<sub>H4</sub>/P; I<sub>H1</sub> -(Exhibit: Residential Investment) Based on the graph, if the capital market is initially in equilibrium at A with the relative price of housing equal to PH3/P and the stock of housing capital equal to KH2, then holding other factors constant, if a massive earthquake destroys a significant portion of the stock of housing capital, house prices will move to ______ and the flow of residential housing will move to______.


A) PH1/P; IH4
B) PH2/P; IH3
C) PH3/P; IH2
D) PH4/P; IH1

E) A) and B)
F) A) and C)

Correct Answer

verifed

verified

The existence of financing constraints makes investment:


A) more sensitive to current conditions.
B) less sensitive to current conditions.
C) spending follow a random walk.
D) spending increase during recessions.

E) All of the above
F) B) and D)

Correct Answer

verifed

verified

How will a decrease in output during a recession affect: a. business fixed investment? b. residential investment? c. inventory investment?

Correct Answer

verifed

verified

a. Lower output reduces employment and t...

View Answer

A firm renting out capital does not bear as cost the:


A) lost interest it could have earned by depositing the purchase price of the capital in a bank.
B) wear and tear on the capital.
C) wages of the labor that works with the capital.
D) capital loss or gain in the asset's value.

E) None of the above
F) A) and C)

Correct Answer

verifed

verified

As firms' profits increase during a boom, business fixed investment will increase because:


A) the marginal product of capital falls.
B) stock-out avoidance diminishes.
C) corporate tax payments decrease.
D) the high profit levels relax financing constraints.

E) A) and C)
F) A) and B)

Correct Answer

verifed

verified

Showing 21 - 40 of 112

Related Exams

Exam 1

The Science of Macroeconomics

66 Questions

Exam 2

The Data of Macroeconomics

122 Questions

Exam 3

National Income: Where It Comes From and Where It Goes

171 Questions

Exam 4

The Monetary System: What It Is and How It Works

118 Questions

Exam 5

Inflation: Its Causes, Effects, and Social Costs

118 Questions

Exam 6

The Open Economy

139 Questions

Exam 7

Unemployment and the Labor Market

118 Questions

Exam 8

Economic Growth I: Capital Accumulation and Population Growth

121 Questions

Exam 9

Economic Growth II: Technology, Empirics, and Policy

103 Questions

Exam 10

Introduction to Economic Fluctuations

124 Questions

Exam 11

Aggregate Demand I: Building the Is-Lm Model

126 Questions

Exam 12

Aggregate Demand Ii: Applying the Is-Lm Model

145 Questions

Exam 13

The Open Economy Revisited: the Mundell-Fleming Model and the Exchange-Rate Regime

135 Questions

Exam 14

Aggregate Supply and the Short-Run Tradeoff Between Inflation and Unemployment

112 Questions

Exam 15

A Dynamic Model of Economic Fluctuations

110 Questions

Exam 16

Understanding Consumer Behavior

121 Questions

Exam 18

Alternative Perspectives on Stabilization Policy

100 Questions

Exam 19

Government Debt and Budget Deficits

100 Questions

Exam 20

The Financial System: Opportunities and Dangers

120 Questions

Show Answer