Macroeconomics Practice Test - 14: Theories of Investment
Click on the correct option. Text colour will change into green if your chosen option is corret and if it is wrong, it will change into red:
- In the rigid version of the accelerator theory of investment, net investment in successive periodds is as follows when the capital-output ratio is 2 and the expected increase in output is $15, $20, $20 and $15
- $30 each period
- $15, $20, $20 and $15 in successive periods
- $30, $40, $40, and $30 in successive periods
- $7.50, $10, $10, and $7.50 in successive periods
- Which of the following statements is true?
- Gross investment is more stable than net investment when replacement investment is constant over time
- Net investment is more stable than gross investment when replacement is constant over time
- Replacement investment equals \(\upsilon \Delta Y\)
- Net investment is greatet than \(\upsilon \Delta Y\) when the capital-output ratio decreases
- The user cost of capital is
- The real rate of interest
- The nominal rate of interest
- The real rate of interest plus the rate of depreciation
- The nominal rate of interest plus the rate of depreciation
- Which of the following economic policies will not lower the user cost of capital?
- A 5% increase in the nominal money supply, which causes a 5% increase in the expected rate of inflation
- The introduction of an investment tax credit
- An increase in the rate at which firms are allowed to depreciate machinery for tax purposes
- A reduction in the corporate income tax rate
- The marginal cost benefit from capital is the
- Incremental output associated with an addition to the stock of capital
- Cost saving associated with employing less labor inputs and additional capital inputs to produce a fixed level of output
- Incremental cost of capital associated with the addition of a unit of capital
- Incremental profit associated with the addition of a unit of capital
- A decrease in the user cost of capital will result in the production process becoming
- More capital-intensive and the capital-output ratio decreasing
- More capital-intensive and the capital-output ratio increasing
- Less capital-intensive and the capital-output ratio decreasing
- Less capital-intensive and the capital-output ratio increasing
- A distributed lag for net investment may be due to
- A decrease in the capital-output ratio
- An increase in the capital-output ratio
- Limited, short-run production capabilities in the capital goods industry
- A decrease in the expected level of output
- Tobin's q-theory of investment indicates that firms add to their stock of capital when
- The replacement value of their real assets exceeds the market value of their financial assets
- The market value of their financial assets exceeds the replacement value of their real assets
- The market value of their real assets exceeds the book value of their financial assets
- The market value of their real assets exceeds the book value of their real assets
- When the inventory-sales ratio is 0.25, a
- 25% increase in expected sales results in a 100% increase in inventory
- $25 increase in expected sales results in a $100 increase in inventory
- 100% increase in expected sales results in a 25% increase in inventory
- $100 increase in expected sales results in a $25 increase in inventory
- Which of the following results in an increase in the inventory-sales ratio?
- A decrease in the cost of holding inventory, ceteris paribus
- An increase in the probability of delivery delays for materials, ceteris paribus
- An increase in expected sales, ceteris paribus
- An increase in the uncertainty of expected sales, ceteris paribus
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