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Unformatted text preview: Mock Multiple Choice, Investment Kyle F. Herkenhoff * UCLA Department of Economics May 10, 2011 Which of the following are true? (We assume a Cobb-Douglas Utility U = c 1 / 2 1 c 1 / 2 2 ). (a) If there is a permanent increase in G , then the user cost of capital increases because t must go up. (b) If there is a permanent increase in G , then the national savings curve does not change. (c) If there is a temporary increase in G , then the savings curve shifts to the right. (d) In steady state, if population growth is zero gross investment is equal to last periods depreciated capital. (e) Net investment cannot be negative. (f) Two of the above (g) None of the above * Correspondence: email@example.com 1 RECALL Shortcut formula for effect on NATIONAL SAVINGS of temporary increase in G 1 (I will show this in class): S = ( - 1) G 1 Ex. when = . 5, then an increase in G 1 always decreases national savings S = (- ) (use this for part (a)). This means there is less savings at each interest rate. The(use this for part (a))....
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