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mt302 - ECO 2013-02 Third midterm Questions will probably...

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ECO 2013-02, Third midterm Questions will probably not be in the order you saw them, but they are the same you answered. Correct answers at the end. 1) Suppose the capital stock is 100 in the beginning of year 1, gross investment for the year is 20, and the capital stock wears out at a rate of 10 percent per year. The value of the capital stock at the end of year 1 is A) 120. B) 110. C) 102. D) 118. 2) Gross investment is equal to A) depreciation minus net investment. B) net investment plus capital stock. C) depreciation plus net investment. D) net investment minus capital stock. 3) In a recession, gross investment tends to ________ and net investment tends to ________. A) increase; increase B) increase; decrease C) decrease; increase D) decrease; decrease 4) During most years in the United States since 1981, 5) The ________ interest rate approximately equals the ________ interest rate minus ________. A) nominal; real; depreciation B) nominal; real; inflation C) real; nominal; depreciation D) real; nominal; inflation 6) If the nominal interest rate is 11 percent and the inflation rate is 9 percent, then the real interest rate is approximately A) 2 percent. B) 20 percent. C) 4 percent. D) 18 percent. 7) A firm's decision to invest in a project is based on the 8) Suppose a firm is considering three investment projects, A, B and C. Project A's expected profit rate is 10 percent, project B's is 8 percent and project C's is 6 percent. If the real interest rate is 7 percent, which projects will the firm complete? A) A only B) A and B C) A, B, and C D) C only 9) A decrease in the real interest rate leads to a ________ the investment demand curve, and a decrease in the expected profit rate leads to a ________ the investment demand curve. 10) Households will choose to save more if A) disposable income is expected to decrease in the future.
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B) current disposable income increases. C) Both answers A and B are correct. D) Neither answer A nor B is correct.
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