Question 1

Residential investment equals the:

Accepted Answer

A)  stock of existing housing. 
B)  flow of new housing. 
C)  demand for housing. 
D)  imputed rent from housing. 
A)  stock of existing housing. 
B)  flow of new housing. 
C)  demand for housing. 
D)  imputed rent from housing.

Question 2

In a typical recession, more than half the fall in spending comes from a decline in:

Accepted Answer

A)  consumption spending. 
B)  net foreign investment. 
C)  government spending. 
D)  inventory investment. 
A)  consumption spending. 
B)  net foreign investment. 
C)  government spending. 
D)  inventory investment.

Question 3

Why does the real rental price of capital adjust?

Accepted Answer

The real rental price of capit

Question 4

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

Accepted Answer

A)  follow a random walk. 
B)  can be predicted from available information. 
C)  are driven by irrational waves of optimism and pessimism. 
D)  are based on what investors expect other investors to pay. 
A)  follow a random walk. 
B)  can be predicted from available information. 
C)  are driven by irrational waves of optimism and pessimism. 
D)  are based on what investors expect other investors to pay.

Question 5

Use the following to answer questions :
Exhibit: Rental Price of Capital  
-(Exhibit: Rental Price of Capital) Based on the graph, if the capital market is initially in equilibrium at A with real rental price R3/P and capital stock K2, then holding other factors constant, an improvement in technology that increases the marginal productivity of capital will move:

Accepted Answer

A)  the demand curve from D2 to D1. 
B)  the demand curve from D2 to D3. 
C)  the supply of capital from K2 to K1. 
D)  the supply of capital from K2 to K3. 
A)  the demand curve from D2 to D1. 
B)  the demand curve from D2 to D3. 
C)  the supply of capital from K2 to K1. 
D)  the supply of capital from K2 to K3.

Question 6

During a financial crisis, such as the Great Depression or the recession of 2008-09, financing constraints become ______ prevalent and investment spending ______.

Accepted Answer

A)  more; increases 
B)  more; decreases 
C)  less; increases 
D)  less; decreases 
A)  more; increases 
B)  more; decreases 
C)  less; increases 
D)  less; decreases

Question 7

Some economists have predicted that as members of the baby-boom generation (a large segment of the population) age, they will have a smaller demand for housing. Use the model of residential investment to illustrate graphically the impact of this prediction on housing prices and residential investment.

Accepted Answer

@#IMG-DLM& The relative price

Question 8

Which production function is suggested by economists to see what variables influence the equilibrium rental price? Explain.

Accepted Answer

Many economists consider the Cobb-Dougla

Question 9

If the capital stock is fixed and something happens to raise the marginal product of capital (MPK) for any given quantity of capital, then the real rental price of capital will:

Accepted Answer

A)  remain the same. 
B)  rise. 
C)  fall. 
D)  fall and then rise. 
A)  remain the same. 
B)  rise. 
C)  fall. 
D)  fall and then rise.

Question 10

Loans made to subprime borrowers in the early 2000s had the immediate impact of ______ housing demand and ______ housing prices.

Accepted Answer

A)  increasing; increasing 
B)  increasing; decreasing 
C)  decreasing; decreasing 
D)  decreasing; increasing 
A)  increasing; increasing 
B)  increasing; decreasing 
C)  decreasing; decreasing 
D)  decreasing; increasing

Question 11

Use the following to answer questions :
Exhibit: Rental Price of Capital  
-(Exhibit: Rental Price of Capital) Based on the graph, if the capital market is initially in equilibrium at A with real rental price R3/P and capital stock K2, then holding other factors constant, an increase in the capital stock to K3 will change the real rental price of capital to:

Accepted Answer

A)  R1/P. 
B)  R2/P. 
C)  R4/P. 
D)  R5/P. 
A)  R1/P. 
B)  R2/P. 
C)  R4/P. 
D)  R5/P.

Question 12

The production-smoothing motive for holding inventories suggests that:

Accepted Answer

A)  firms hold inventories in order to produce more output. 
B)  when sales are low, firms produce more than they sell and put the extra goods in inventories. 
C)  firms hold inventories to avoid losing sales. 
D)  when a product is only partly completed, its components are counted as part of the firm's inventory. 
A)  firms hold inventories in order to produce more output. 
B)  when sales are low, firms produce more than they sell and put the extra goods in inventories. 
C)  firms hold inventories to avoid losing sales. 
D)  when a product is only partly completed, its components are counted as part of the firm's inventory.

Residential investment equals the:

In a typical recession, more than half the fall in spending comes from a decline in:

Why does the real rental price of capital adjust?

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

During a financial crisis, such as the Great Depression or the recession of 2008-09, financing constraints become prevalent and investment spending .

Which production function is suggested by economists to see what variables influence the equilibrium rental price? Explain.

If the capital stock is fixed and something happens to raise the marginal product of capital (MPK) for any given quantity of capital, then the real rental price of capital will:

Loans made to subprime borrowers in the early 2000s had the immediate impact of housing demand and housing prices.

The production-smoothing motive for holding inventories suggests that:

The Science of Macroeconomics

The Data of Macroeconomics

National Income: Where It Comes From and Where It Goes

The Monetary System: What It Is and How It Works

Inflation: Its Causes, Effects, and Social Costs

The Open Economy

Unemployment and the Labor Market

Economic Growth I: Capital Accumulation and Population Growth

Economic Growth II: Technology, Empirics, and Policy

Introduction to Economic Fluctuations

Aggregate Demand I: Building the Is-Lm Model

Aggregate Demand Ii: Applying the Is-Lm Model

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

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

A Dynamic Model of Economic Fluctuations

Understanding Consumer Behavior

Alternative Perspectives on Stabilization Policy

Government Debt and Budget Deficits

The Financial System: Opportunities and Dangers

Filters

Exam 17: The Theory of Investment

Residential investment equals the:

In a typical recession, more than half the fall in spending comes from a decline in:

Why does the real rental price of capital adjust?

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

During a financial crisis, such as the Great Depression or the recession of 2008-09, financing constraints become ______ prevalent and investment spending ______.

Which production function is suggested by economists to see what variables influence the equilibrium rental price? Explain.

If the capital stock is fixed and something happens to raise the marginal product of capital (MPK) for any given quantity of capital, then the real rental price of capital will:

Loans made to subprime borrowers in the early 2000s had the immediate impact of ______ housing demand and ______ housing prices.

The production-smoothing motive for holding inventories suggests that:

The Science of Macroeconomics

The Data of Macroeconomics

National Income: Where It Comes From and Where It Goes

The Monetary System: What It Is and How It Works

Inflation: Its Causes, Effects, and Social Costs

The Open Economy

Unemployment and the Labor Market

Economic Growth I: Capital Accumulation and Population Growth

Economic Growth II: Technology, Empirics, and Policy

Introduction to Economic Fluctuations

Aggregate Demand I: Building the Is-Lm Model

Aggregate Demand Ii: Applying the Is-Lm Model

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

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

A Dynamic Model of Economic Fluctuations

Understanding Consumer Behavior

Alternative Perspectives on Stabilization Policy

Government Debt and Budget Deficits

The Financial System: Opportunities and Dangers

Filters

During a financial crisis, such as the Great Depression or the recession of 2008-09, financing constraints become prevalent and investment spending .

Loans made to subprime borrowers in the early 2000s had the immediate impact of housing demand and housing prices.