practice_midterm2_v1(1)

practice_midterm2_v1(1) - BUAD 350 Macroeconomics Analysis...

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BUAD 350 Macroeconomics Analysis for Business Decisions Fall 2010 Practice Midterm October 2010 1. Calculate the user cost of capital of a machine that costs $10,000 and depreciates at a rate of 20% when the expected real interest rate is 5% A) 2000 B) 2500 C) 3000 D) 1500 2. If the income effect is stronger than the substitution effect, an increase in the real interest rate implies that the desired savings A) decrease for a borrower B) decrease for a saver C) increase for savers and borrowers D) decrease for savers and borrowers 3. An increase in TFP will A) shift the investment curve to the right B) shift the investment curve to the left C) shift the saving curve to the right D) shift the saving curve to the left 4. Suppose that the marginal product of capital in the economy can be described by MPK = A (10 - 0 . 05 K ), where K is the capital stock, and A is TFP. The depreciation rate of capital, d , is 6% per period, and the real interest rate is 4%. If A = 1, the desired level of capital is A) 200 B) 198 C) 198.66 D) 100.66
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5. Suppose that the marginal product of capital in the economy can be described by MPK = A (10 - 0 . 05 K ), where K is the capital stock, and A is TFP. The depreciation rate of capital, d , is 6% per period, and the real interest rate is 4%. If A = 1 . 5, the desired level of capital is A) 200 B) 198 C) 198.66 D) 100.66 6. Suppose that the current level of output is 1000 and the elasticity of output with respect
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practice_midterm2_v1(1) - BUAD 350 Macroeconomics Analysis...

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