Economic booms should stimulate investment spending

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Chapter 23 / Exercise 11
Exploring Economics
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79.Economic booms should stimulate investment spending because during booms: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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Chapter 23 / Exercise 11
Exploring Economics
Sexton
Expert Verified
80.During recessions, investment spending usually decreases because:
81.As firms' profits increase during a boom, business fixed investment will increase because:
82.Business fixed investment, residential investment, and inventory investment ______ as the real interest rate increases and ______ as output increases.
83.According to the neoclassical model of investment, the immediate impact of a rise in the real interest rate will be to:A)increase the cost of capital, the rental price of capital, and the rate of investment.B)increase the cost of capital and the rental price of capital, but to lower the rate of investment.C)increase the rental price of capital and the rate of investment, but to leave the cost of capital unchanged.D)increase the cost of capital and lower the rate of investment, but to leave the rental price of capital unchanged.
84.According to the neoclassical model of investment, the immediate impact of an earthquake that destroys part of the capital stock will be to:
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85.Assume that the government levies a one-time-only tax on oil companies equal to a proportion of the value of the company's oil reserves. According to the neoclassical model, if firms face no financing constraints and also believe the tax will not be repeated,the effect of this tax on investment by these firms will be to:

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