Exam 18: Open-Economy Macroeconomics: Basic Concepts

A) real interest rate.
B) nominal interest rate.
C) raw materials used up in the production of inventories.
D) labor used in the production of inventories.

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A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease

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A) increase; increase
D) increase; decrease
C) decrease; increase
D) decrease; decrease

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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.

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A) the realized profits of firms.
B) the marginal product of capital.
C) the interest rate.
D) tax rules affecting firms.

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A) an improvement in technology raises the marginal product of capital.
B) an increase in population raises the demand for housing.
C) an increase in government spending raises the real interest rate.
D) the investment tax credit is reinstated.

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A) enables a firm to deduct a certain proportion of each dollar spent on capital goods from its profits.
B) enables a firm to deduct a certain proportion of each dollar spent on capital goods from its tax bill.
C) reduces the corporate tax rate in proportion to each dollar spent on capital goods.
D) allows a firm to count a certain proportion of each dollar spent on capital goods as depreciation expense.

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A) real interest rate. nominal
B) interest rate. relative
C) price of housing. overall
D) price level.

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a. Lower output reduces employment and t...

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A) plant and equipment, home building, and inventories.
B) plant and equipment and home building, but not inventories.
C) plant and equipment and inventories, but not home building.
D) inventories and home building, but not plant and equipment.

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A) cost of buying and renting out one unit of capital measured in units of the economy's output.
B) marginal product of capital minus the cost of capital.
C) ratio of the replacement value of installed capital to the market value of installed capital.
D) ratio of the market value of installed capital to the replacement cost of installed capital.

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A) always less than true economic depreciation.
B) always greater than true economic
C) depreciation. always equal to true economic depreciation.
D) sometimes greater than true economic depreciation and sometimes less.

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A) a lower quantity of labor employed.
B) a lower stock of capital.
C) better technology.
D) a higher labor-capital ratio.

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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.

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A) the inventory accelerator; changes in Tobin's q
B) changes in the real cost of capital; financing constraints
C) changes in the underlying economic fundamentals; irrational waves of optimism or pessimism
D) reductions in investment tax credits; the use of historical cost rather than replacement cost in computing depreciation costs

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A) the real interest rate increases.
B) corporate tax rates usually increase.
C) the purchase price of capital increases.
D) higher levels of employment increase the marginal product of capital.

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A) increase the capital stock of the firm.
B) maintain the existing capital stock of the firm.
C) allow inventories to run down.
D) decrease the capital stock of the firm.

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A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease

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