Question 1

From the perspective of macroeconomics, investment refers to:
A)purchases of capital assets that increase a nation's productivity.
B)the purchase of bonds.
C)spending on financial assets such as stocks.
D)saving money in banks.

Accepted Answer

In macroeconomics, investment refers to purchases of capital assets that increase a nation's productivity, such as buying new machinery or constructing a new building for a business. This definition of investment is more focused on physical assets than financial assets such as stocks or bonds. Saving money in banks is not considered investment in macroeconomics, as it is seen as more of a personal financial decision.

Question 2

Investment refers to:
A)depreciation of capital stocks.
B)spending on physical capital.
C)spending on financial assets such as stocks.
D)saving money in banks.

Accepted Answer

Investment refers to spending on physical capital such as machinery, factories, buildings, and equipment, with the expectation of generating future income and profits. It is a key factor in economic growth and development as it increases productive capacity and efficiency. The other options (A, C, D) do not accurately reflect the concept of investment.

Question 3

The capital stock in an economy is the:
A)present value of a future stream of payments.
B)user cost of capital.
C)total quantity of capital at a point in time.
D)total amount of money at a point in time.

Accepted Answer

The capital stock refers to the total quantity of capital that exists at a particular point in time, including physical assets such as equipment, buildings, and infrastructure. It does not refer to the present value of future payments, user cost of capital or the total amount of money in the economy.

Question 4

In macroeconomics, the difference between saving and investment is that:
A)saving is the money left over after paying for spending, and investment is the purchase of new capital.
B)saving is the money left over after paying for spending, and investment is the purchase of stocks and bonds.
C)saving is created by the government, and investment is specific to firms.
D)saving does not depend on income, but investment depends on profitability.

Accepted Answer

Saving refers to the amount of money left over after an individual or a household pays for consumption expenditures, while investment refers to a purchase of new capital goods. In other words, saving represents the portion of income that is not spent on consumption, while investment represents the creation of new physical capital assets that can be used to produce goods and services in the future. Thus, choice A correctly defines the difference between saving and investment. Choices B, C, and D are incorrect because they either define investment in terms of financial assets rather than physical capital, or make false statements about the sources or determinants of saving and investment.

Question 5

Which of the following is true about investment and saving?
A)Investment always exceeds saving in an economy.
B)Investment has the same meaning as saving.
C)Investment creates new productive capacity, whereas saving does not involve any spending on new capital.
D)Investment does not depend on the real interest rate, whereas saving does.

Accepted Answer

Investment involves spending on new capital goods or projects to create new productive capacity, while saving is simply setting aside a portion of one's income for future use. Investment can lead to economic growth and higher future returns, while saving alone does not involve any spending on new capital. Therefore, option C is correct. Option A is false because investment can be less than saving if there are insufficient investment opportunities, and option B is incorrect because saving is only a portion of income, while investment involves spending that portion on new capital. Option D is incorrect because both saving and investment are influenced by the real interest rate.

Question 6

Depreciation refers to the:
A)decline in the quality of output produced by a business.
B)fall in the price of output that the business produces.
C)spending by a business on new capital assets.
D)decline in capital due to wear and tear, obsolescence, accidental damage, and aging.

Accepted Answer

Depreciation refers to the decline in the value of capital assets due to wear and tear, obsolescence, accidental damage, and aging. It is a non-cash expense that reflects the reduction in the book value of an asset over its useful life. It is important for businesses to account for depreciation when calculating their taxable income and assessing the true cost of their operations.

Question 7

Your university installs new computer systems in its labs. Each year, the value of these computers falls due to normal wear and tear. These costs are:
A)depreciation costs.
B)up-front costs.
C)real interest rate costs.
D)the price of tuition.

Accepted Answer

The costs of the computers falling in value due to wear and tear are depreciation costs.

Question 8

The three types of business investment are:
A)business investment, inventories, and housing investment.
B)consumption, exports, and imports.
C)spending on equipment, structures, and intellectual property.
D)rent, depreciation, and real interest.

Accepted Answer

The three types of business investment are spending on equipment, structures, and intellectual property. Choice A is incorrect because only one of the three types is mentioned. Choice B is incorrect because consumption, exports, and imports are not types of business investment. Choice D is incorrect because rent, depreciation, and real interest are not types of business investment, but rather factors that affect business investment.

Question 9

Which of the following is an investment?
A)Marios builds a new house.
B)Mary buys $4,000 worth of Alibaba stock.
C)Cameron saves $400 in his savings account.
D)Dale purchases a house that was built in 1940.

Accepted Answer

Building a new house is considered an investment because it involves the creation of new capital goods.

Question 10

Which of the following is an investment?
A)Fred pays a contractor to add two new rooms to his house.
B)Dan purchases $6,800 worth of gold.
C)Frank buys a used car.
D)Ben's computer depreciates by 15%.

Accepted Answer

Investment refers to the expenditure on capital goods that will be used to produce goods or services in the future. Adding new rooms to a house increases its value and utility, making it an investment.

Question 11

When considering the user cost of capital, next year's revenue is the:
A)marginal cost.
B)depreciation cost.
C)marginal benefit.
D)real interest that is forgone.

Accepted Answer

The user cost of capital includes the concept that next year's revenue represents the marginal benefit of investing in capital this year, as it is the additional income generated from the investment.

Question 12

Refer to the following statistics. Based on these statistics, the level of business investment is:
Equipment: $2.5 billion
Business structures: $2 billion
Intellectual property: $4 billion
Inventories: $0.2 billion
Housing: $3 billion
A)$2.5 billion.
B)$8.7 billion.
C)$8.5 billion.
D)$6 billion.

Accepted Answer

The level of business investment includes Equipment, Business Structures, and Intellectual Property, which add up to $8.5 billion. Inventories and Housing are not considered part of business investment.

Question 13

Refer to the following statistics. Based on these statistics, the level of business investment is:
Inventories: $12 million
Housing: $400 million
Equipment: $500 million
Business structures: $350 million
Intellectual property: $700 million
A)$1,550 million.
B)$500 million.
C)$1,562 million.
D)$1,050 million.

Accepted Answer

Business investment includes equipment, business structures, and intellectual property, totaling $500 million + $350 million + $700 million = $1,550 million.

Question 14

Refer to the following statistics. Based on these statistics, the level of business investment is:
Inventories: $52 million
Housing: $600 million
Equipment: $989 million
Business structures: $500 million
Intellectual property: $800 million
A)$2,289 million.
B)$989 million.
C)$1,300 million.
D)$2,341 million.

Accepted Answer

Business investment includes equipment, business structures, and intellectual property products, totaling $989 million + $500 million + $800 million = $2,289 million.

Question 15

The user cost of capital consists of:
A)corporate taxes and depreciation.
B)forgone interest and depreciation.
C)the sum of all interest paid on business loans.
D)domestic investment and foreign investment.

Accepted Answer

User cost of capital is the cost of using a capital asset that includes both the forgone interest (return on investment that could have been earned by investing in some other assets) and depreciation (loss in the value of the asset due to wear and tear over time). Corporate taxes and interest paid on business loans may be considered as a part of the overall cost of capital, but they do not specifically relate to the user cost of capital. Domestic and foreign investments are not relevant to the concept of user cost of capital.

Question 16

The user cost of capital is the:
A)extra cost associated with using one more machine next year.
B)real interest rate.
C)price of the machine plus forgone interest.
D)total cost of purchasing one more machine next year.

Accepted Answer

The answer of The user cost of capital is the:
A)extra...

Question 17

A new assembly line robot with a price tag of $2.5 million is expected to depreciate by 3% at the end of next year. The real interest rate is 2.5%. What is the user cost of the robot for one year?
A)$62,500
B)$75,000
C)$137,500
D)$12,500

Accepted Answer

The user cost of capital formula is:
User cost = (depreciation + real interest rate*value of capital)/value of capital
In this case:
depreciation = 3%*$2.5 million = $75,000
value of capital at the beginning of the year = $2.5 million
value of capital at the end of the year = $2.5 million - $75,000 = $2,425,000
User cost = ($75,000 + 2.5%*$2,425,000)/$2.5 million = $137,500

Question 18

A new assembly line robot costs $1.2 million and is expected to depreciate by 10% at the end of next year. The real interest rate is 4.5%. What is the user cost of the robot for one year?
A)$66,000
B)$54,000
C)$174,000
D)$120,000

Accepted Answer

The user cost of the robot for one year includes both the depreciation cost and the opportunity cost of capital. The depreciation cost is 10% of $1.2 million, which is $120,000. The opportunity cost of capital is 4.5% of $1.2 million, which is $54,000. Adding both gives $120,000 + $54,000 = $174,000.

Question 19

An industrial tanker costs $52 million and is expected to depreciate by 8% at the end of next year. The real interest rate is 6.5%. What is the user cost of the tanker for one year?
A)$7.54 million
B)$3.38 million
C)$4.16 million
D)$780,000

Accepted Answer

The user cost of the tanker for one year includes both the depreciation cost and the opportunity cost of the capital tied up in the tanker. The depreciation cost is 8% of $52 million, which is $4.16 million. The opportunity cost is the real interest rate (6.5%) applied to the initial cost of the tanker, which is 6.5% of $52 million, equal to $3.38 million. Adding these two costs together gives $4.16 million + $3.38 million = $7.54 million.

Question 20

A large industrial washer system costs $69,000 and is expected to depreciate by 15% at the end of next year. The real interest rate is 7%. What is the user cost of the washer system for one year?
A)$15,180
B)$4,830
C)$10,350
D)$5,520

Accepted Answer

The user cost of the washer system for one year includes both the depreciation and the opportunity cost of the capital. The depreciation is 15% of $69,000, which is $10,350. The opportunity cost is the real interest rate (7%) applied to the initial cost of the washer, which is 7% of $69,000, equal to $4,830. Adding these two costs together gives $10,350 + $4,830 = $15,180.

Quiz 26: Investment

From the perspective of macroeconomics, investment refers to:

Investment refers to:

The capital stock in an economy is the:

In macroeconomics, the difference between saving and investment is that:

Which of the following is true about investment and saving?

Depreciation refers to the:

Your university installs new computer systems in its labs. Each year, the value of these computers falls due to normal wear and tear. These costs are:

The three types of business investment are:

Which of the following is an investment?

Which of the following is an investment?

When considering the user cost of capital, next year's revenue is the:

Refer to the following statistics. Based on these statistics, the level of business investment is: Equipment: $2.5 billion Business structures: $2 billion Intellectual property: $4 billion Inventories: $0.2 billion Housing: $3 billion

Refer to the following statistics. Based on these statistics, the level of business investment is: Inventories: $12 million Housing: $400 million Equipment: $500 million Business structures: $350 million Intellectual property: $700 million

Refer to the following statistics. Based on these statistics, the level of business investment is: Inventories: $52 million Housing: $600 million Equipment: $989 million Business structures: $500 million Intellectual property: $800 million

The user cost of capital consists of:

The user cost of capital is the:

A new assembly line robot with a price tag of $2.5 million is expected to depreciate by 3% at the end of next year. The real interest rate is 2.5%. What is the user cost of the robot for one year?

A new assembly line robot costs $1.2 million and is expected to depreciate by 10% at the end of next year. The real interest rate is 4.5%. What is the user cost of the robot for one year?

An industrial tanker costs $52 million and is expected to depreciate by 8% at the end of next year. The real interest rate is 6.5%. What is the user cost of the tanker for one year?

A large industrial washer system costs $69,000 and is expected to depreciate by 15% at the end of next year. The real interest rate is 7%. What is the user cost of the washer system for one year?