Exam 15: Capital and Time

In a perfectly competitive market a firm's rental rate for a machine (v)will be given by: v = p(r + d)where r is the prevailing rate of interest and d is the depreciation rate.In this formula p represents

Accelerated depreciation laws may increase firms' investment in equipment because

Adding uncertainty to future consumption will tend to increase savings providing:

The present value of $1 payable in two years is

If a person's inter-temporal utility function is given by $U \left( c _ { 1 } , c _ { 2 } \right) = \frac { c _ { 1 } ^ { \delta } } { \delta } + \frac { c _ { 2 } ^ { \delta } } { \delta } ; \delta \leq 1$ ,lower values for $\delta$ will:

Suppose an individual has a fixed amount of wealth to allocate between consumption in two periods (c₁ and c₂).Any funds not spent in period 1 will earn interest (at the rate r)which will increase purchasing power in period 2. Consider four possible reactions to an increase in r: I.c₁ increases. II.c₁ decreases. III.c₂ increases. IV.c₂ decreases. Which of these is consistent with the hypothesis that both c₁ and c₂ are normal goods?

A rise in interest rates leads to

Rate of return refers to

If a tree's value (v)is growing according to the equation $v ( t ) = e ^ { . i t - .0025 s t }$ with an interest rate of 5 percent,the tree should be harvested when t =

The present value of $1 payable in the future decreases

In Fisher's model of the determination of the rate of return,the price of a "future good" is

The annual rental rate for a machine is

A fall in interest rates leads to

An increase in the corporate profits tax will most likely lead to

An inner tube company which is maximizing its own profits will keep renting machines up to the point where

Under competitive conditions the relative price of a finite resource would be expected to

If the interest rate rises,the present discounted value of a stream of payments owed in the future