Question 1

Onerous regulations on businesses that take effect next year (in a closed economy) reduce businesses' expected future marginal product of capital.As a result,the real interest rate ________ and saving ________.

Accepted Answer

A)  falls; declines
B)  falls; increases
C)  rises; increases
D)  rises; declinesE) All of the above
F) A) and B)

Question 2

At the start of the year,your firm's capital stock equaled $10 million,and at the end of the year it equaled $15 million.The average depreciation rate on your capital stock is 20%.Net investment during the year equaled

Accepted Answer

A)  $3 million.
B)  $4 million.
C)  $5 million.
D)  $7 million.E) C) and D)
F) A) and D)

Question 3

Suppose the one-year T-bill rate was 5% on 1/1/2007,4% on 1/1/2008,and 6% on 1/1/2009.The GDP deflator (2004 = 100)was 110 on 1/1/2007,112 on 1/1/2008,114 on 1/1/2009,and 120 on 1/1/2010.The tax rate on interest income is 30%.
(a)Calculate the after-tax nominal rate of return for 2007,2008,and 2009.
(b)If you began with $1000 on 1/1/2007 and invested in T-bills each year (paying taxes at the end of each year),how much would you have in nominal terms on 1/1/2010? How much would you have in real terms (2004 dollars)?
(c)How much was your nominal after-tax interest earned in part (b)over the three years? How much did you earn in real (2004)after-tax dollars?

Accepted Answer

(a)2007: 3.5% = 0.05 × .7; 2008: 2.8% = ...

Exam 4: Consumption, Saving, and Investment

Onerous regulations on businesses that take effect next year (in a closed economy) reduce businesses' expected future marginal product of capital.As a result,the real interest rate and saving .

Correct Answer
verified

Correct Answer
verified
(a)2007: 3.5% = 0.05 × .7; 2008: 2.8% = ...
View Answer

At the start of the year,your firm's capital stock equaled $10 million,and at the end of the year it equaled $15 million.The average depreciation rate on your capital stock is 20%.Net investment during the year equaled

Correct Answer
verified

Exam 4: Consumption, Saving, and Investment

Onerous regulations on businesses that take effect next year (in a closed economy) reduce businesses' expected future marginal product of capital.As a result,the real interest rate ________ and saving ________.

Correct AnswerverifiedShow Answer

Correct Answerverified(a)2007: 3.5% = 0.05 × .7; 2008: 2.8% = ...View AnswerShow Answer

At the start of the year,your firm's capital stock equaled $10 million,and at the end of the year it equaled $15 million.The average depreciation rate on your capital stock is 20%.Net investment during the year equaled

Correct AnswerverifiedShow Answer

Onerous regulations on businesses that take effect next year (in a closed economy) reduce businesses' expected future marginal product of capital.As a result,the real interest rate and saving .

Correct Answer
verified

Correct Answer
verified
(a)2007: 3.5% = 0.05 × .7; 2008: 2.8% = ...
View Answer

Correct Answer
verified