Question 1

If your firm had $300,000,the going rate of interest on business loans was 12 percent and your firm's expected profit rate was 17 percent,what would you do with this money?

Accepted Answer

The best choice would be to use the money to finance your own expansion since the expected profit rate of 17 percent is greater than the going rate of interest on business loans of 12 percent. This means that the return on investment would be higher than the cost of borrowing money. Keeping the money in the bank would not generate much return, and lending it to a competitor would not benefit your own firm.

Question 2

-When disposable income is 1,000,saving is

Accepted Answer

If disposable income is 1,000 and saving is -500, it implies that consumption exceeds income by 500, leading to negative saving.

Question 3

Statement I.A corporation's capitalization consists of its stock and bonds.
Statement II.Economists do not consider the purchase of corporate stock an investment.

Accepted Answer

Statement I is true because a corporation's capitalization typically includes both its stock and bonds. Statement II is also true because economists often define investment as the purchase of goods that are not consumed today but are used in the future to create wealth, whereas buying corporate stock is considered a financial investment, not an economic investment.

Question 4

During recessions,our capacity utilization rate usually falls below

Accepted Answer

During recessions, the capacity utilization rate typically falls below 80% as businesses reduce production in response to lower demand.

Question 5

In the U.S. ,gross investment is ___________ larger than net investment.

Accepted Answer

Gross investment includes both replacement investment and net investment. Replacement investment is the investment that is used to replace depreciated capital. Net investment is the investment that is used to increase the capital stock. In the U.S., gross investment is usually larger than net investment because the capital stock is growing.

Question 6

Statement I.Bondholders are owners of a corporation.
Statement II.Common stockholders have voting control of a corporation.

Accepted Answer

Bondholders are not owners of a corporation, but rather creditors who lend money to the corporation. Common stockholders are the owners of the corporation, but voting control can also be granted to preferred stockholders or through other mechanisms such as a board of directors. Therefore, statement I is false and statement II is true.

Question 7

Statement I.In dollar terms,I is currently about half the size of

Accepted Answer

Explanation: Without specific data or context, it's impossible to verify the accuracy of Statement I regarding the size of "I" (presumably investment) in dollar terms. However, Statement II is generally true; investment is considered more volatile than other GDP components like consumption, due to its sensitivity to interest rates, business expectations, and economic conditions.

Question 8

Statement I.Inventory investment can be negative.
Statement II.Inventory investment in the U.S.fluctuates a great deal from one year to the next.

Accepted Answer

Statement I is true because inventory investment can be negative if a company sells more goods than it produces, or if it reduces its inventory levels.

Statement II is also true because inventory investment in the U.S. is affected by various factors such as changes in consumer demand, production levels, and global economic conditions. Therefore, it can fluctuate greatly from year to year.

Question 9

-When disposable income is 1,000,I is

Accepted Answer

The answer of 
-When disposable income is 1,000,I is
...

Question 10

Each of these is a determinant of the level of I except the

Accepted Answer

The term "I" typically refers to investment. The main determinants of investment levels include capacity utilization rate, sales outlook, interest rate, and expected profit rate. Margin rate, however, is not directly a determinant of investment levels; it is more related to profitability and pricing strategies.

Question 11

In 2008 the non oil related corporation with sales over $200 billion was

Accepted Answer

As per the given information, the corporation has to be non oil-related with sales over $200 billion. Among the given options, only Walmart fits this criteria. Walmart had sales of over $200 billion in 2008 and is not an oil-related corporation. Therefore, the answer is A) Walmart stores.

Question 12

During a recession,inventory investment

Accepted Answer

The answer of During a recession,inventory investment
...

Question 13

Statement I.More firms are proprietorships than are partnerships and corporations combined.
Statement II.Nearly all corporations are very large firms.

Accepted Answer

Statement I is true as there are far more sole proprietorships than partnerships and corporations. Statement II is false since there are plenty of smaller corporations and not all corporations are very large.

Question 14

Which is the most accurate statement?

Accepted Answer

Investment typically involves sacrificing current consumption for future benefits, such as saving money now to earn interest or dividends later, or a business spending on equipment to increase future production.

Question 15

Statement I.Almost half of today's fixed investment is in information processing equipment and software.
Statement II.Fluctuations in GDP are largely caused by fluctuations in investment.

Accepted Answer

Statement I is true because a significant portion of fixed investment in modern economies is indeed in information processing equipment and software, reflecting the importance of technology and digital infrastructure. Statement II is also true as investment is a highly volatile component of GDP, and fluctuations in investment often lead to fluctuations in GDP.

Question 16

Statement I.S corporations offer their shareholders limited liability and pay no corporate income tax.
Statement II.The vast majority of business owners incorporate to secure limited liability.

Accepted Answer

Both statements are true. S corporations indeed provide their shareholders with limited liability and do not pay corporate income tax themselves; instead, profits and losses are passed through to shareholders' personal tax returns. Additionally, one of the primary reasons business owners choose to incorporate (into any form of corporation, not just S corporations) is to secure limited liability, protecting their personal assets from business debts and claims.

Question 17

During recessions,investment in plant and equipment most likely

Accepted Answer

During recessions, businesses tend to see a decline in demand, which makes them less likely to invest in expanding capacity. This means that investment in plant and equipment is likely to go down.

Question 18

Statement I.The purchase of 100 shares of Apple Corporation stock adds directly to plant and equipment.
Statement II.The purchase of 100 shares of Apple Corporation stock is not an investment,but merely a financial transaction.

Accepted Answer

Statement I is false because purchasing stocks does not directly add to plant and equipment. Statement II is true because purchasing stocks is a financial transaction and not an investment in the sense that it does not involve acquiring ownership or control over the company's operations.

Question 19

-When disposable income is 1,000,C + I is

Accepted Answer

The answer of 
-When disposable income is 1,000,C + I...

Question 20

Statement I.The typical corporation is a very small firm.
Statement II.Nearly all large companies are corporations.

Accepted Answer

The answer of Statement I.The typical corporation is a very...

Quiz 6: The Business Investment Sector

If your firm had $300,000,the going rate of interest on business loans was 12 percent and your firm's expected profit rate was 17 percent,what would you do with this money?

-When disposable income is 1,000,saving is

Statement I.A corporation's capitalization consists of its stock and bonds. Statement II.Economists do not consider the purchase of corporate stock an investment.

During recessions,our capacity utilization rate usually falls below

In the U.S. ,gross investment is ___________ larger than net investment.

Statement I.Bondholders are owners of a corporation. Statement II.Common stockholders have voting control of a corporation.

Statement I.In dollar terms,I is currently about half the size of

Statement I.Inventory investment can be negative. Statement II.Inventory investment in the U.S.fluctuates a great deal from one year to the next.

-When disposable income is 1,000,I is

Each of these is a determinant of the level of I except the

In 2008 the non oil related corporation with sales over $200 billion was

During a recession,inventory investment

Statement I.More firms are proprietorships than are partnerships and corporations combined. Statement II.Nearly all corporations are very large firms.

Which is the most accurate statement?

Statement I.Almost half of today's fixed investment is in information processing equipment and software. Statement II.Fluctuations in GDP are largely caused by fluctuations in investment.

Statement I.S corporations offer their shareholders limited liability and pay no corporate income tax. Statement II.The vast majority of business owners incorporate to secure limited liability.

During recessions,investment in plant and equipment most likely

Statement I.The purchase of 100 shares of Apple Corporation stock adds directly to plant and equipment. Statement II.The purchase of 100 shares of Apple Corporation stock is not an investment,but merely a financial transaction.

-When disposable income is 1,000,C + I is

Statement I.The typical corporation is a very small firm. Statement II.Nearly all large companies are corporations.