Question 1

If the market value of a firm is $6 billion and the replacement cost of installed capital is equal to $3 billion, then Tobin's q is equal to

Accepted Answer

A)   9.
B)   3.
C)   18.
D)   2.E) A) and B)
F) A) and C)

Question 2

Desired Level of the Capital Stock
 
-Consider the two graphs above. Suppose there is increased concentration in the retail sector________. fewer, larger companies. This would ________ the desired level of inventories, as depicted in graph ________.

Accepted Answer

A)   increase; B
B)   increase; A
C)   decrease; B
D)   decrease; AE) None of the above
F) A) and B)

Question 3

Which of the following is not a component of investment spending?

Accepted Answer

A)   spending by firms on equipment.
B)   the purchase of 1000 shares of corporate stock.
C)   residential construction.
D)   changes in inventories.E) None of the above
F) All of the above

Question 4

Applying neoclassical theory to the housing market, the idea that "housing is a good investment" refers to ________.

Accepted Answer

A)   higher expected household income
B)   the inability to buy as much housing at a higher price
C)   an expected increase in the relative price of housing
D)   a decrease in the cost of building new housesE) A) and B)
F) A) and C)

Question 5

Should you stay in school beyond the current semester? Describe how you might use the neoclassical theory of investment to help you decide.

Accepted Answer

Additional schooling makes sense, if the...

Question 6

The fraction of capital that wears out every year is known as ________.

Accepted Answer

A)   gross investment.
B)   depreciation.
C)   net investment.
D)   devaluation.E) None of the above
F) B) and C)

Question 7

Desired Level of the Capital Stock
 
-Consider the two graphs above. Suppose that final goods are assembled only when ordered and to satisfy the precise preferences of each consumer. This would ________ the desired level of inventories, as depicted in graph ________.

Accepted Answer

A)   increase; B
B)   increase; A
C)   decrease; B
D)   decrease; AE) C) and D)
F) None of the above

Question 8

Desired Level of the Capital Stock
 
-Consider the two graphs above. Suppose that the domestic currency is expected to strengthen. This would ________ the desired level of the capital stock, as depicted in graph ________.

Accepted Answer

A)   increase; B
B)   increase; A
C)   decrease; B
D)   decrease; AE) A) and B)
F) A) and C)

Question 9

Through its impact on the demand of housing, higher expected income would lead to ________.

Accepted Answer

A)   an increase in relative housing prices.
B)   a decrease in expected house price appreciation
C)   a decrease in residential investment.
D)   a decrease in subprime borrowers.E) None of the above
F) C) and D)

Question 10

Home ownership rates are highest in ________.

Accepted Answer

A)   the United States.
B)   central European countries, e.g. Germany and Austria.
C)   east European states, e.g. Romania and Slovakia.
D)   the Benelux countries, i.e. Belgium, the Netherlands and Luxembourg.E) A) and C)
F) None of the above

Question 11

An increase in residential construction would be caused by ________.

Accepted Answer

A)   a decline in household formation.
B)   higher expected future income.
C)   a decrease in the expected appreciation of housing.
D)   higher real mortgage rates.E) All of the above
F) B) and C)

Question 12

Desired Level of the Capital Stock
 
-Consider the two graphs above. Suppose that firms are able to use inventories as collateral for low-interest loans. This would ________ the desired level of inventories, as depicted in graph ________.

Accepted Answer

A)   increase; B
B)   increase; A
C)   decrease; B
D)   decrease; AE) B) and C)
F) A) and D)

Question 13

Describe the behavior of the supply of housing during a period of rising demand for housing. How does this help to explain the recurring phenomenon of boom & bust in the housing market?

Accepted Answer

When the demand for housing rises, the s...

Question 14

Fluctuations in Tobin's q are ________, because ________.

Accepted Answer

A)   frequent and substantial; asset prices are volatile
B)   frequent and substantial; replacement costs are volatile
C)   infrequent and mild; replacement costs are relatively stable
D)   infrequent and mild; the marginal product of capital does not change quicklyE) B) and C)
F) All of the above

Question 15

Desired Level of the Capital Stock
 
-Consider the two graphs above. Suppose that financial liberalization enables more businesses to access credit markets. This would ________ the desired level of the capital stock, as depicted in graph ________.

Accepted Answer

A)   increase; B
B)   increase; A
C)   decrease; B
D)   decrease; AE) A) and C)
F) A) and D)

Question 16

Desired Level of the Capital Stock
 
-Consider the two graphs above. Suppose that allowable deductions from taxable business income are increased. This would ________ the desired level of the capital stock, as depicted in graph ________.

Accepted Answer

A)   increase; B
B)   increase; A
C)   decrease; B
D)   decrease; AE) A) and B)
F) A) and C)

Question 17

A car dealer that maintains a large number of automobiles on their lot so that they avoid losing a sale to another dealer who has the make and model a given customer wants is engaged in ________.

Accepted Answer

A)   production smoothing.
B)   work in process.
C)   stock-out avoidance.
D)   first degree price discrimination.E) B) and C)
F) B) and D)

Question 18

The federal government of the United States has ________.

Accepted Answer

A)   proven itself unable to significantly influence U.S. home ownership.
B)   has been able to increase the volume of home ownership in the U.S.
C)   proven itself able to effectively control monetary policy.
D)   has been unable to increase the volume of government spending since WWII.E) A) and D)
F) B) and C)

Question 19

Applying neoclassical theory to the housing market, ________ causes a downward shift of the residential investment curve.

Accepted Answer

A)   higher expected household income
B)   the inability to buy as much housing at a higher price
C)   an expected increase in the relative price of housing
D)   a decrease in the cost of building new housesE) B) and C)
F) A) and D)

Question 20

A decrease in residential construction would be caused by ________.

Accepted Answer

A)   tighter financing constraints.
B)   higher expected appreciation of housing prices.
C)   a higher relative price of housing.
D)   higher expected incomes.E) A) and D)
F) A) and B)

Exam 19: Investment

Desired Level of the Capital Stock -Consider the two graphs above. Suppose there is increased concentration in the retail sector________. fewer, larger companies. This would ________ the desired level of inventories, as depicted in graph ________.

Correct AnswerverifiedShow Answer

Desired Level of the Capital Stock -Consider the two graphs above. Suppose that the domestic currency is expected to strengthen. This would ________ the desired level of the capital stock, as depicted in graph ________.

Correct AnswerverifiedShow Answer

Which of the following is not a component of investment spending?

Correct AnswerverifiedShow Answer

Fluctuations in Tobin's q are ________, because ________.

Correct AnswerverifiedShow Answer

Home ownership rates are highest in ________.

Correct AnswerverifiedShow Answer

An increase in residential construction would be caused by ________.

Correct AnswerverifiedShow Answer

Through its impact on the demand of housing, higher expected income would lead to ________.

Correct AnswerverifiedShow Answer

Describe the behavior of the supply of housing during a period of rising demand for housing. How does this help to explain the recurring phenomenon of boom & bust in the housing market?

Correct AnswerverifiedWhen the demand for housing rises, the s...View AnswerShow Answer

Should you stay in school beyond the current semester? Describe how you might use the neoclassical theory of investment to help you decide.

Correct AnswerverifiedAdditional schooling makes sense, if the...View AnswerShow Answer

Desired Level of the Capital Stock -Consider the two graphs above. Suppose that final goods are assembled only when ordered and to satisfy the precise preferences of each consumer. This would ________ the desired level of inventories, as depicted in graph ________.

Correct AnswerverifiedShow Answer

Desired Level of the Capital Stock -Consider the two graphs above. Suppose that firms are able to use inventories as collateral for low-interest loans. This would ________ the desired level of inventories, as depicted in graph ________.

Correct AnswerverifiedShow Answer

Desired Level of the Capital Stock -Consider the two graphs above. Suppose that financial liberalization enables more businesses to access credit markets. This would ________ the desired level of the capital stock, as depicted in graph ________.

Correct AnswerverifiedShow Answer

A decrease in residential construction would be caused by ________.

Correct AnswerverifiedShow Answer

If the market value of a firm is $6 billion and the replacement cost of installed capital is equal to $3 billion, then Tobin's q is equal to

Correct AnswerverifiedShow Answer

Applying neoclassical theory to the housing market, the idea that "housing is a good investment" refers to ________.

Correct AnswerverifiedShow Answer

Desired Level of the Capital Stock -Consider the two graphs above. Suppose that allowable deductions from taxable business income are increased. This would ________ the desired level of the capital stock, as depicted in graph ________.

Correct AnswerverifiedShow Answer

The fraction of capital that wears out every year is known as ________.

Correct AnswerverifiedShow Answer

The federal government of the United States has ________.

Correct AnswerverifiedShow Answer

Applying neoclassical theory to the housing market, ________ causes a downward shift of the residential investment curve.

Correct AnswerverifiedShow Answer

A car dealer that maintains a large number of automobiles on their lot so that they avoid losing a sale to another dealer who has the make and model a given customer wants is engaged in ________.

Correct AnswerverifiedShow Answer

Desired Level of the Capital Stock -Consider the two graphs above. Suppose there is increased concentration in the retail sector. fewer, larger companies. This would the desired level of inventories, as depicted in graph .

Correct Answer
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Desired Level of the Capital Stock -Consider the two graphs above. Suppose that the domestic currency is expected to strengthen. This would the desired level of the capital stock, as depicted in graph .

Correct Answer
verified

Correct Answer
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Fluctuations in Tobin's q are , because .

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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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When the demand for housing rises, the s...
View Answer

Correct Answer
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Additional schooling makes sense, if the...
View Answer

Desired Level of the Capital Stock -Consider the two graphs above. Suppose that final goods are assembled only when ordered and to satisfy the precise preferences of each consumer. This would the desired level of inventories, as depicted in graph .

Correct Answer
verified

Desired Level of the Capital Stock -Consider the two graphs above. Suppose that firms are able to use inventories as collateral for low-interest loans. This would the desired level of inventories, as depicted in graph .

Correct Answer
verified

Desired Level of the Capital Stock -Consider the two graphs above. Suppose that financial liberalization enables more businesses to access credit markets. This would the desired level of the capital stock, as depicted in graph .

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Desired Level of the Capital Stock -Consider the two graphs above. Suppose that allowable deductions from taxable business income are increased. This would the desired level of the capital stock, as depicted in graph .

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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