Question 1

In a booming economy,__________ and so inventories __________.

Accepted Answer

A) production is rising;rise 
B) consumption is rising;fall 
C) government expenditures shrink;rise 
D) inflation rises;fall 
E) personal savings rise;rise 
A) production is rising;rise 
B) consumption is rising;fall 
C) government expenditures shrink;rise 
D) inflation rises;fall 
E) personal savings rise;rise A

Question 2

When Tobin's q is __________,the market is signalling a firm should __________.

Accepted Answer

A) greater than one;invest in more capital 
B) equal to zero;shut down 
C) infinity;sell its stock holdings 
D) less than one;raise dividend payments 
E) equal to one;try to take over a firm with a Tobin's q = 0. 
A) greater than one;invest in more capital 
B) equal to zero;shut down 
C) infinity;sell its stock holdings 
D) less than one;raise dividend payments 
E) equal to one;try to take over a firm with a Tobin's q = 0. A

Question 3

You decide to move to the mountains of Colorado and want to know what would be a good offering price on a home,but you know you'll only own it a year.Fortunately,you are armed with the simple residential investment equation.You have the following information: the real interest rate is 4 percent;the depreciation rate of homes is 5 percent;average rent is $1,000;and you will have a 20 percent downpayment.You offer the owner,rounding to the nearest dollar,

Accepted Answer

A) $25,000. 
B) $125,000. 
C) $4,167. 
D) $17,241. 
E) $50,000. 
A) $25,000. 
B) $125,000. 
C) $4,167. 
D) $17,241. 
E) $50,000. B

Question 4

In the simple model of financial asset model arbitrage we assume that:

Accepted Answer

A) futures markets are perfectly efficient. 
B) there is no uncertainty about stock prices. 
C) stock prices follow a random walk. 
D) the risk premium does not equal zero. 
E) capital gains are zero. 
A) futures markets are perfectly efficient. 
B) there is no uncertainty about stock prices. 
C) stock prices follow a random walk. 
D) the risk premium does not equal zero. 
E) capital gains are zero.

Question 5

-Consider Figure 16.3 below,which shows changes in private inventories.Which of the following (approximate)dates are likely to be periods of recession? Given your analysis,inventories are __________.

Accepted Answer

A) 1980;procyclical 
B) 1997;procyclical 
C) 2008;countercyclical 
D) 2001;procyclical 
E) d and a 
A) 1980;procyclical 
B) 1997;procyclical 
C) 2008;countercyclical 
D) 2001;procyclical 
E) d and a

Question 6

The largest component of physical investment is:

Accepted Answer

A) nonresidential fixed investment. 
B) software. 
C) residential investment. 
D) changes in inventory. 
E) unplanned investment. 
A) nonresidential fixed investment. 
B) software. 
C) residential investment. 
D) changes in inventory. 
E) unplanned investment.

Question 7

The arbitrage condition for residential investment is:

Accepted Answer

A)    . 
B)    . 
C)    . 
D)    . 
E)    . 
A)    . 
B)    . 
C)    . 
D)    . 
E)    .

Question 8

The arbitrage condition for capital shows that returns to a bank account are equal to the user cost of capital.

Accepted Answer

A) True 
 B)False

Question 9

For the profit-maximizing firm,if the real interest rate is greater than the marginal product of capital,the firm should

Accepted Answer

A) invest in more capital. 
B) get rid of some capital. 
C) keep its capital stock the same,as there is a risk premium attached to the real interest rate. 
D) hire more workers. 
E) buy stocks. 
A) invest in more capital. 
B) get rid of some capital. 
C) keep its capital stock the same,as there is a risk premium attached to the real interest rate. 
D) hire more workers. 
E) buy stocks.

Question 10

If a stock is just as likely to move up or down it __________.

Accepted Answer

A) is highly correlated. 
B) follows a random walk. 
C) has a high standard deviation. 
D) is stationary. 
E) is highly volatile. 
A) is highly correlated. 
B) follows a random walk. 
C) has a high standard deviation. 
D) is stationary. 
E) is highly volatile.

Question 11

For the following questions use Figure 16.1 below.  
-Consider Figure 16.1 above.If there is an increase in capital gains,then curve __________ would shift to curve __________.

Accepted Answer

A) d;c 
B) b;a 
C) c;d 
D) a;b 
E) not enough information 
A) d;c 
B) b;a 
C) c;d 
D) a;b 
E) not enough information

Question 12

In the mid- to late 2000s,several housing markets in the United States had a bubble in residential investment.One cause was likely to be:

Accepted Answer

A) consistently rising real interest rates. 
B) growth in residential capital gains. 
C) rising residential depreciation. 
D) more lax down-payment requirements. 
E) controls which held rents down. 
A) consistently rising real interest rates. 
B) growth in residential capital gains. 
C) rising residential depreciation. 
D) more lax down-payment requirements. 
E) controls which held rents down.

Question 13

Which of the following are motives for holding inventories?
i.pipeline theory
ii.present value inventory control
iii.high transportation costs

Accepted Answer

A) i 
B) ii 
C) i and iii 
D) i,ii,and iii 
E) ii and iii 
A) i 
B) ii 
C) i and iii 
D) i,ii,and iii 
E) ii and iii

Question 14

Between 2006 and 2009 the component of investment which fell the furthest was __________.

Accepted Answer

A) software 
B) residential investment 
C) changes in inventory 
D) nonresidential fixed investment 
E) unplanned investment 
A) software 
B) residential investment 
C) changes in inventory 
D) nonresidential fixed investment 
E) unplanned investment

Question 15

In the equation   
,   
is the real interest rate.

Accepted Answer

A) True 
 B)False

Question 16

The smallest component of physical investment is:

Accepted Answer

A) nonresidential fixed investment. 
B) software. 
C) residential investment. 
D) changes in inventory. 
E) unplanned investment. 
A) nonresidential fixed investment. 
B) software. 
C) residential investment. 
D) changes in inventory. 
E) unplanned investment.

Question 17

-Consider Figure 16.3,which shows changes in private inventories.Which of the following (approximate)dates are likely to be periods of an expansion? Given your analysis,inventories are __________.

Accepted Answer

A) 2009;procyclical 
B) 2001;countercyclical 
C) 1982;procyclical 
D) 1991;procyclical 
E) none. 
A) 2009;procyclical 
B) 2001;countercyclical 
C) 1982;procyclical 
D) 1991;procyclical 
E) none.

Question 18

Write down the equation for the stock price.Use this equation to answer the following:
a.Your stock broker calls to tell you she has a great deal on a stock.She gives you the following information: the real interest rate is 4 percent;the capital gain on this stock is 3.5 percent;and it pays $2.50 in dividends.How much should you pay for this stock?
b.The next day she calls back and tells you about another stock that is for sale (i.e. ,that is the market price)for $75.She doesn't know the dividend growth but she does know the dividend payment,$0.35 per share,and the real interest rate,4 percent.For you to buy this stock,how much annual dividend growth should you expect at that price?
c.A hot stock tip comes from a friend.The price of the stock is $50,the dividend gain is 2.5 percent,and you know the real interest rate from your previous two discussions with your broker.How much of a dividend payment will you want?

Accepted Answer

The stock price is @#IMG-DLM& .
a.From the above e

Question 19

If firms "production smooth" they:

Accepted Answer

A) produce the same amount each month. 
B) use "just in time" inventory control. 
C) overproduce in bad times and underproduce in good times. 
D) keep the growth of their production constant,regardless of the business cycle. 
E) produce just enough to meet their orders. 
A) produce the same amount each month. 
B) use "just in time" inventory control. 
C) overproduce in bad times and underproduce in good times. 
D) keep the growth of their production constant,regardless of the business cycle. 
E) produce just enough to meet their orders.

Question 20

From the residential arbitrage equation a rise in the down payment will __________ the price of the house,while an increase in the real interest rate will __________ the house price.

Accepted Answer

A) reduce;raise 
B) raise;reduce 
C) reduce;reduce 
D) raise;have no effect on 
E) raise;raise 
A) reduce;raise 
B) raise;reduce 
C) reduce;reduce 
D) raise;have no effect on 
E) raise;raise

In a booming economy, and so inventories .

When Tobin's q is ,the market is signalling a firm should .

In the simple model of financial asset model arbitrage we assume that:

-Consider Figure 16.3 below,which shows changes in private inventories.Which of the following (approximate)dates are likely to be periods of recession? Given your analysis,inventories are __________.

The largest component of physical investment is:

The arbitrage condition for residential investment is:

The arbitrage condition for capital shows that returns to a bank account are equal to the user cost of capital.

For the profit-maximizing firm,if the real interest rate is greater than the marginal product of capital,the firm should

If a stock is just as likely to move up or down it __________.

For the following questions use Figure 16.1 below. -Consider Figure 16.1 above.If there is an increase in capital gains,then curve would shift to curve .

In the mid- to late 2000s,several housing markets in the United States had a bubble in residential investment.One cause was likely to be:

Which of the following are motives for holding inventories? i.pipeline theory ii.present value inventory control iii.high transportation costs

Between 2006 and 2009 the component of investment which fell the furthest was __________.

In the equation , is the real interest rate.

The smallest component of physical investment is:

-Consider Figure 16.3,which shows changes in private inventories.Which of the following (approximate)dates are likely to be periods of an expansion? Given your analysis,inventories are __________.

If firms "production smooth" they:

From the residential arbitrage equation a rise in the down payment will the price of the house,while an increase in the real interest rate will the house price.

Introduction to Macroeconomics

Measuring the Macroeconomy

An Overview of Long- Run Economic Growth

A Model of Production

The Solow Growth Model

Growth and Ideas

The Labor Market,wages,and Unemployment

Inflation

An Introduction to the Short Run

The Great Recession: a First Look

The Is Curve

Monetary Policy and the Phillips Curve

Stabilization Policy and the Asad Framework

The Great Recession and the Short-Run Model

Consumption

The Government and the Macroeconomy

International Trade

Exchange Rates and International Finance

Parting Thoughts

Filters

Exam 16: Investment

In a booming economy,__________ and so inventories __________.

When Tobin's q is __________,the market is signalling a firm should __________.

In the simple model of financial asset model arbitrage we assume that:

-Consider Figure 16.3 below,which shows changes in private inventories.Which of the following (approximate)dates are likely to be periods of recession? Given your analysis,inventories are __________.

The largest component of physical investment is:

The arbitrage condition for residential investment is:

The arbitrage condition for capital shows that returns to a bank account are equal to the user cost of capital.

For the profit-maximizing firm,if the real interest rate is greater than the marginal product of capital,the firm should

If a stock is just as likely to move up or down it __________.

For the following questions use Figure 16.1 below. -Consider Figure 16.1 above.If there is an increase in capital gains,then curve __________ would shift to curve __________.

In the mid- to late 2000s,several housing markets in the United States had a bubble in residential investment.One cause was likely to be:

Which of the following are motives for holding inventories? i.pipeline theory ii.present value inventory control iii.high transportation costs

Between 2006 and 2009 the component of investment which fell the furthest was __________.

In the equation , is the real interest rate.

The smallest component of physical investment is:

-Consider Figure 16.3,which shows changes in private inventories.Which of the following (approximate)dates are likely to be periods of an expansion? Given your analysis,inventories are __________.

If firms "production smooth" they:

From the residential arbitrage equation a rise in the down payment will __________ the price of the house,while an increase in the real interest rate will __________ the house price.

Introduction to Macroeconomics

Measuring the Macroeconomy

An Overview of Long- Run Economic Growth

A Model of Production

The Solow Growth Model

Growth and Ideas

The Labor Market,wages,and Unemployment

Inflation

An Introduction to the Short Run

The Great Recession: a First Look

The Is Curve

Monetary Policy and the Phillips Curve

Stabilization Policy and the Asad Framework

The Great Recession and the Short-Run Model

Consumption

The Government and the Macroeconomy

International Trade

Exchange Rates and International Finance

Parting Thoughts

Filters

In a booming economy, and so inventories .

When Tobin's q is ,the market is signalling a firm should .

For the following questions use Figure 16.1 below. -Consider Figure 16.1 above.If there is an increase in capital gains,then curve would shift to curve .

From the residential arbitrage equation a rise in the down payment will the price of the house,while an increase in the real interest rate will the house price.