1375. QUESTION: An increase in the anticipated rate of inflation will cause the real interest rate to
a. increase by more than change in inflation rate
b. increase by the same amount as change in inflation rate
c. increase by less than the change in the inflation rate
d. stay the same
CORRECT ANSWER: stay the same
1376. QUESTION: Profits are earned by
a. owners of capital
b. entrepreneurs who bear the risk of production
c. owners of land
d. owners of highly productive resources
CORRECT ANSWER: entrepreneurs who bear the risk of production
1377. QUESTION: If the rate of return on a projected capital project is 10% while the interest rate is 8%, a firm should
a. undertake the project
b. not undertake the project
c. determine the cost of the project before making a decision
d. determine the present value of the project's future marginal revenue products
CORRECT ANSWER: undertake the project
1378. QUESTION: Which of the following is an example of intangible capital?
a. machines used in production
b. a factory
c. improvements on land
d. experience on the part of workers
CORRECT ANSWER: experience on the part of workers
1379. QUESTION: Which of the following would be most likely to result from an increase in the interest rate?
a. households buy more cars
b. firms increase new plant construction
c. more workers quit and go back to college
d. households substitute future for current consumption
CORRECT ANSWER: households substitute future for current consumption
1380. QUESTION: If the nominal interest rate is 11% and the real rate is 6%, then the expected rate of inflation is
a. 11%
b. 6%
c. 5%
d. 2%
CORRECT ANSWER: 5%
1381. QUESTION: Which of the following does not result in economic profits?
a. monopoly
b. risk taking
c. exceptional innovation
d. perfect competition
CORRECT ANSWER: perfect competition
1382. QUESTION: If the nominal interest rate is 14% and the anticipated rate of inflation is 10%, the real interest rate is
a. 4%
b. 6%
c. 10%
d. 26%
CORRECT ANSWER: 4%
1383. QUESTION: A company's computer system would depreciate more quickly in an economic sense as a result of
a. hiring less labor to work with the computer
b. a revolutionary innovation in computer hardware
c. a change in tax laws allowing greater depreciation expenses
d. an increase in the price of computers
CORRECT ANSWER: a revolutionary innovation in computer hardware
1384. QUESTION: A capital good that produces for only one year, has a marginal revenue product of $1,000 for that year, and costs $800, has a rate of return of
a. 8%
b. 10%
c. 25%
d. 20%
CORRECT ANSWER: 25%
1385. QUESTION: A bond's interest rate would be higher if
a. it has a low default risk
b. it has low liquidity
c. there is low inflation
d. it has a long time to maturity
CORRECT ANSWER: it has low liquidity
1386. QUESTION: Which of the following is not an example of a capital good?
a. Texas oil and natural gas reserves
b. land that has been improved by irrigation
c. machines and factories
d. cleared forests and drained swamps
CORRECT ANSWER: Texas oil and natural gas reserves
1387. QUESTION: For the economy as a whole, the opportunity cost of an input that is completely fixed in supply is
a. a cost of production
b. shared by all consumers of the production the input produces
c. zero
d. equal to the price of the input
CORRECT ANSWER: zero
1388. QUESTION: Holding everything else constant, the stock of capital would grow more slowly if there were
a. increased borrowing by the government
b. a lower equilibrium real interest rate
c. an increased supply of loanable funds
d. an increase in the marginal physical product of capital
CORRECT ANSWER: increased borrowing by the government
1389. QUESTION: A piece of improved land that has a marginal revenue product of $10,000 per year in perpetuity and that costs $50,000 has a rate of return of
a. 50%
b. 20%
c. 25%
d. 5%
CORRECT ANSWER: 20%
1390. QUESTION: If interest rates are expected to rise in the future then
a. the long-term interest rate will be higher than the short-term rate
b. long-term and short-term rates will be about equal
c. the short-term interest rate will be higher than the long-term rate
d. no one will buy long-term bonds
CORRECT ANSWER: the long-term interest rate will be higher than the short-term rate
1391. QUESTION: Human capital theory is concerned with all of the following except
a. investment in training and education
b. intangible capital formation
c. the distribution of income
d. investments in technology
CORRECT ANSWER: investments in technology
1392. QUESTION: The high short-run earnings of building owners in fast-growing sunbelt cities are an example of
a. quasi rents
b. pure economic rents
c. earnings made with a perfectly elastic supply curve
d. how only monopoly markets can earn economic profits
CORRECT ANSWER: quasi rents
1393. QUESTION: If the interest rate is 8%, then a loan of $400 will earn interest each year in the amount of
a. $8
b. $40
c. $32
d. $50
CORRECT ANSWER: $32
1394. QUESTION: An increase in the market rate of interest causes the rate of return on any specific capital project to
a. increase
b. decrease
c. change unpredictability
d. not change
CORRECT ANSWER: not change
1395. QUESTION: Pure economic rents are
a. payments to factors owned by entrepreneurs
b. only payments to land
c. payments to factors whose supply is perfectly inelastic
d. economic profits
CORRECT ANSWER: payments to factors whose supply is perfectly inelastic
1396. QUESTION: The best way to view the interest rate is that it is
a. the price of money
b. the price of credit
c. equal to the expected rate of inflation
d. the medium of exchange for present transactions
CORRECT ANSWER: the price of credit
1397. QUESTION: For the superstars of the sports and entertainment industries
a. economic rent is zero
b. a large fraction of their income is economic rent
c. opportunity cost is equal to their current salaries
d. opportunity cost is greater than their current salaries
CORRECT ANSWER: a large fraction of their income is economic rent
1398. QUESTION: IF the interest rate is 8%, then the percent value of a perpetual stream of payments of $1,000 each is
a. $8,000
b. $12,500
c. $10,000
d. $1,000
CORRECT ANSWER: $12,500
1399. QUESTION: In equilibrium, firms will undertake those investment projects that have
a. rates of return greater than the interest
b. positive rates of return
c. rates of return less than the interest rate
d. marginal revenue product greater than the interest rate
CORRECT ANSWER: rates of return greater than the interest
1400. QUESTION: In the 1970s, the price received by owners of oil-drilling equipment increased substantially because demand went up by short-term supply was quite inelastic. The increase income that they earned was
a. economic rents
b. quasi rents
c. profits
d. interest
CORRECT ANSWER: quasi rentsthe higher return is due to higher risk
1375. QUESTION: An increase in the anticipated rate of inflation will cause the real interest rate to
a. increase by more than change in inflation rate
b. increase by the same amount as change in inflation rate
c. increase by less than the change in the inflation rate
d. stay the same
CORRECT ANSWER: stay the same
1376. QUESTION: Profits are earned by
a. owners of capital
b. entrepreneurs who bear the risk of production
c. owners of land
d. owners of highly productive resources
CORRECT ANSWER: entrepreneurs who bear the risk of production
1377. QUESTION: If the rate of return on a projected capital project is 10% while the interest rate is 8%, a firm should
a. undertake the project
b. not undertake the project
c. determine the cost of the project before making a decision
d. determine the present value of the project's future marginal revenue products
CORRECT ANSWER: undertake the project
1378. QUESTION: Which of the following is an example of intangible capital?
a. machines used in production
b. a factory
c. improvements on land
d. experience on the part of workers
CORRECT ANSWER: experience on the part of workers
1379. QUESTION: Which of the following would be most likely to result from an increase in the interest rate?
a. households buy more cars
b. firms increase new plant construction
c. more workers quit and go back to college
d. households substitute future for current consumption
CORRECT ANSWER: households substitute future for current consumption
1380. QUESTION: If the nominal interest rate is 11% and the real rate is 6%, then the expected rate of inflation is
a. 11%
b. 6%
c. 5%
d. 2%
CORRECT ANSWER: 5%
1381. QUESTION: Which of the following does not result in economic profits?
a. monopoly
b. risk taking
c. exceptional innovation
d. perfect competition
CORRECT ANSWER: perfect competition
1382. QUESTION: If the nominal interest rate is 14% and the anticipated rate of inflation is 10%, the real interest rate is
a. 4%
b. 6%
c. 10%
d. 26%
CORRECT ANSWER: 4%
1383. QUESTION: A company's computer system would depreciate more quickly in an economic sense as a result of
a. hiring less labor to work with the computer
b. a revolutionary innovation in computer hardware
c. a change in tax laws allowing greater depreciation expenses
d. an increase in the price of computers
CORRECT ANSWER: a revolutionary innovation in computer hardware
1384. QUESTION: A capital good that produces for only one year, has a marginal revenue product of $1,000 for that year, and costs $800, has a rate of return of
a. 8%
b. 10%
c. 25%
d. 20%
CORRECT ANSWER: 25%
1385. QUESTION: A bond's interest rate would be higher if
a. it has a low default risk
b. it has low liquidity
c. there is low inflation
d. it has a long time to maturity
CORRECT ANSWER: it has low liquidity
1386. QUESTION: Which of the following is not an example of a capital good?
a. Texas oil and natural gas reserves
b. land that has been improved by irrigation
c. machines and factories
d. cleared forests and drained swamps
CORRECT ANSWER: Texas oil and natural gas reserves
1387. QUESTION: For the economy as a whole, the opportunity cost of an input that is completely fixed in supply is
a. a cost of production
b. shared by all consumers of the production the input produces
c. zero
d. equal to the price of the input
CORRECT ANSWER: zero
1388. QUESTION: Holding everything else constant, the stock of capital would grow more slowly if there were
a. increased borrowing by the government
b. a lower equilibrium real interest rate
c. an increased supply of loanable funds
d. an increase in the marginal physical product of capital
CORRECT ANSWER: increased borrowing by the government
1389. QUESTION: A piece of improved land that has a marginal revenue product of $10,000 per year in perpetuity and that costs $50,000 has a rate of return of
a. 50%
b. 20%
c. 25%
d. 5%
CORRECT ANSWER: 20%
1390. QUESTION: If interest rates are expected to rise in the future then
a. the long-term interest rate will be higher than the short-term rate
b. long-term and short-term rates will be about equal
c. the short-term interest rate will be higher than the long-term rate
d. no one will buy long-term bonds
CORRECT ANSWER: the long-term interest rate will be higher than the short-term rate
1391. QUESTION: Human capital theory is concerned with all of the following except
a. investment in training and education
b. intangible capital formation
c. the distribution of income
d. investments in technology
CORRECT ANSWER: investments in technology
1392. QUESTION: The high short-run earnings of building owners in fast-growing sunbelt cities are an example of
a. quasi rents
b. pure economic rents
c. earnings made with a perfectly elastic supply curve
d. how only monopoly markets can earn economic profits
CORRECT ANSWER: quasi rents
1393. QUESTION: If the interest rate is 8%, then a loan of $400 will earn interest each year in the amount of
a. $8
b. $40
c. $32
d. $50
CORRECT ANSWER: $32
1394. QUESTION: An increase in the market rate of interest causes the rate of return on any specific capital project to
a. increase
b. decrease
c. change unpredictability
d. not change
CORRECT ANSWER: not change
1395. QUESTION: Pure economic rents are
a. payments to factors owned by entrepreneurs
b. only payments to land
c. payments to factors whose supply is perfectly inelastic
d. economic profits
CORRECT ANSWER: payments to factors whose supply is perfectly inelastic
1396. QUESTION: The best way to view the interest rate is that it is
a. the price of money
b. the price of credit
c. equal to the expected rate of inflation
d. the medium of exchange for present transactions
CORRECT ANSWER: the price of credit
1397. QUESTION: For the superstars of the sports and entertainment industries
a. economic rent is zero
b. a large fraction of their income is economic rent
c. opportunity cost is equal to their current salaries
d. opportunity cost is greater than their current salaries
CORRECT ANSWER: a large fraction of their income is economic rent
1398. QUESTION: IF the interest rate is 8%, then the percent value of a perpetual stream of payments of $1,000 each is
a. $8,000
b. $12,500
c. $10,000
d. $1,000
CORRECT ANSWER: $12,500
1399. QUESTION: In equilibrium, firms will undertake those investment projects that have
a. rates of return greater than the interest
b. positive rates of return
c. rates of return less than the interest rate
d. marginal revenue product greater than the interest rate
CORRECT ANSWER: rates of return greater than the interest
1400. QUESTION: In the 1970s, the price received by owners of oil-drilling equipment increased substantially because demand went up by short-term supply was quite inelastic. The increase income that they earned was
a. economic rents
b. quasi rents
c. profits
d. interest
CORRECT ANSWER: quasi rents
a. increase by more than change in inflation rate
b. increase by the same amount as change in inflation rate
c. increase by less than the change in the inflation rate
d. stay the same
CORRECT ANSWER: stay the same
1376. QUESTION: Profits are earned by
a. owners of capital
b. entrepreneurs who bear the risk of production
c. owners of land
d. owners of highly productive resources
CORRECT ANSWER: entrepreneurs who bear the risk of production
1377. QUESTION: If the rate of return on a projected capital project is 10% while the interest rate is 8%, a firm should
a. undertake the project
b. not undertake the project
c. determine the cost of the project before making a decision
d. determine the present value of the project's future marginal revenue products
CORRECT ANSWER: undertake the project
1378. QUESTION: Which of the following is an example of intangible capital?
a. machines used in production
b. a factory
c. improvements on land
d. experience on the part of workers
CORRECT ANSWER: experience on the part of workers
1379. QUESTION: Which of the following would be most likely to result from an increase in the interest rate?
a. households buy more cars
b. firms increase new plant construction
c. more workers quit and go back to college
d. households substitute future for current consumption
CORRECT ANSWER: households substitute future for current consumption
1380. QUESTION: If the nominal interest rate is 11% and the real rate is 6%, then the expected rate of inflation is
a. 11%
b. 6%
c. 5%
d. 2%
CORRECT ANSWER: 5%
1381. QUESTION: Which of the following does not result in economic profits?
a. monopoly
b. risk taking
c. exceptional innovation
d. perfect competition
CORRECT ANSWER: perfect competition
1382. QUESTION: If the nominal interest rate is 14% and the anticipated rate of inflation is 10%, the real interest rate is
a. 4%
b. 6%
c. 10%
d. 26%
CORRECT ANSWER: 4%
1383. QUESTION: A company's computer system would depreciate more quickly in an economic sense as a result of
a. hiring less labor to work with the computer
b. a revolutionary innovation in computer hardware
c. a change in tax laws allowing greater depreciation expenses
d. an increase in the price of computers
CORRECT ANSWER: a revolutionary innovation in computer hardware
1384. QUESTION: A capital good that produces for only one year, has a marginal revenue product of $1,000 for that year, and costs $800, has a rate of return of
a. 8%
b. 10%
c. 25%
d. 20%
CORRECT ANSWER: 25%
1385. QUESTION: A bond's interest rate would be higher if
a. it has a low default risk
b. it has low liquidity
c. there is low inflation
d. it has a long time to maturity
CORRECT ANSWER: it has low liquidity
1386. QUESTION: Which of the following is not an example of a capital good?
a. Texas oil and natural gas reserves
b. land that has been improved by irrigation
c. machines and factories
d. cleared forests and drained swamps
CORRECT ANSWER: Texas oil and natural gas reserves
1387. QUESTION: For the economy as a whole, the opportunity cost of an input that is completely fixed in supply is
a. a cost of production
b. shared by all consumers of the production the input produces
c. zero
d. equal to the price of the input
CORRECT ANSWER: zero
1388. QUESTION: Holding everything else constant, the stock of capital would grow more slowly if there were
a. increased borrowing by the government
b. a lower equilibrium real interest rate
c. an increased supply of loanable funds
d. an increase in the marginal physical product of capital
CORRECT ANSWER: increased borrowing by the government
1389. QUESTION: A piece of improved land that has a marginal revenue product of $10,000 per year in perpetuity and that costs $50,000 has a rate of return of
a. 50%
b. 20%
c. 25%
d. 5%
CORRECT ANSWER: 20%
1390. QUESTION: If interest rates are expected to rise in the future then
a. the long-term interest rate will be higher than the short-term rate
b. long-term and short-term rates will be about equal
c. the short-term interest rate will be higher than the long-term rate
d. no one will buy long-term bonds
CORRECT ANSWER: the long-term interest rate will be higher than the short-term rate
1391. QUESTION: Human capital theory is concerned with all of the following except
a. investment in training and education
b. intangible capital formation
c. the distribution of income
d. investments in technology
CORRECT ANSWER: investments in technology
1392. QUESTION: The high short-run earnings of building owners in fast-growing sunbelt cities are an example of
a. quasi rents
b. pure economic rents
c. earnings made with a perfectly elastic supply curve
d. how only monopoly markets can earn economic profits
CORRECT ANSWER: quasi rents
1393. QUESTION: If the interest rate is 8%, then a loan of $400 will earn interest each year in the amount of
a. $8
b. $40
c. $32
d. $50
CORRECT ANSWER: $32
1394. QUESTION: An increase in the market rate of interest causes the rate of return on any specific capital project to
a. increase
b. decrease
c. change unpredictability
d. not change
CORRECT ANSWER: not change
1395. QUESTION: Pure economic rents are
a. payments to factors owned by entrepreneurs
b. only payments to land
c. payments to factors whose supply is perfectly inelastic
d. economic profits
CORRECT ANSWER: payments to factors whose supply is perfectly inelastic
1396. QUESTION: The best way to view the interest rate is that it is
a. the price of money
b. the price of credit
c. equal to the expected rate of inflation
d. the medium of exchange for present transactions
CORRECT ANSWER: the price of credit
1397. QUESTION: For the superstars of the sports and entertainment industries
a. economic rent is zero
b. a large fraction of their income is economic rent
c. opportunity cost is equal to their current salaries
d. opportunity cost is greater than their current salaries
CORRECT ANSWER: a large fraction of their income is economic rent
1398. QUESTION: IF the interest rate is 8%, then the percent value of a perpetual stream of payments of $1,000 each is
a. $8,000
b. $12,500
c. $10,000
d. $1,000
CORRECT ANSWER: $12,500
1399. QUESTION: In equilibrium, firms will undertake those investment projects that have
a. rates of return greater than the interest
b. positive rates of return
c. rates of return less than the interest rate
d. marginal revenue product greater than the interest rate
CORRECT ANSWER: rates of return greater than the interest
1400. QUESTION: In the 1970s, the price received by owners of oil-drilling equipment increased substantially because demand went up by short-term supply was quite inelastic. The increase income that they earned was
a. economic rents
b. quasi rents
c. profits
d. interest
CORRECT ANSWER: quasi rentsthe higher return is due to higher risk
1375. QUESTION: An increase in the anticipated rate of inflation will cause the real interest rate to
a. increase by more than change in inflation rate
b. increase by the same amount as change in inflation rate
c. increase by less than the change in the inflation rate
d. stay the same
CORRECT ANSWER: stay the same
1376. QUESTION: Profits are earned by
a. owners of capital
b. entrepreneurs who bear the risk of production
c. owners of land
d. owners of highly productive resources
CORRECT ANSWER: entrepreneurs who bear the risk of production
1377. QUESTION: If the rate of return on a projected capital project is 10% while the interest rate is 8%, a firm should
a. undertake the project
b. not undertake the project
c. determine the cost of the project before making a decision
d. determine the present value of the project's future marginal revenue products
CORRECT ANSWER: undertake the project
1378. QUESTION: Which of the following is an example of intangible capital?
a. machines used in production
b. a factory
c. improvements on land
d. experience on the part of workers
CORRECT ANSWER: experience on the part of workers
1379. QUESTION: Which of the following would be most likely to result from an increase in the interest rate?
a. households buy more cars
b. firms increase new plant construction
c. more workers quit and go back to college
d. households substitute future for current consumption
CORRECT ANSWER: households substitute future for current consumption
1380. QUESTION: If the nominal interest rate is 11% and the real rate is 6%, then the expected rate of inflation is
a. 11%
b. 6%
c. 5%
d. 2%
CORRECT ANSWER: 5%
1381. QUESTION: Which of the following does not result in economic profits?
a. monopoly
b. risk taking
c. exceptional innovation
d. perfect competition
CORRECT ANSWER: perfect competition
1382. QUESTION: If the nominal interest rate is 14% and the anticipated rate of inflation is 10%, the real interest rate is
a. 4%
b. 6%
c. 10%
d. 26%
CORRECT ANSWER: 4%
1383. QUESTION: A company's computer system would depreciate more quickly in an economic sense as a result of
a. hiring less labor to work with the computer
b. a revolutionary innovation in computer hardware
c. a change in tax laws allowing greater depreciation expenses
d. an increase in the price of computers
CORRECT ANSWER: a revolutionary innovation in computer hardware
1384. QUESTION: A capital good that produces for only one year, has a marginal revenue product of $1,000 for that year, and costs $800, has a rate of return of
a. 8%
b. 10%
c. 25%
d. 20%
CORRECT ANSWER: 25%
1385. QUESTION: A bond's interest rate would be higher if
a. it has a low default risk
b. it has low liquidity
c. there is low inflation
d. it has a long time to maturity
CORRECT ANSWER: it has low liquidity
1386. QUESTION: Which of the following is not an example of a capital good?
a. Texas oil and natural gas reserves
b. land that has been improved by irrigation
c. machines and factories
d. cleared forests and drained swamps
CORRECT ANSWER: Texas oil and natural gas reserves
1387. QUESTION: For the economy as a whole, the opportunity cost of an input that is completely fixed in supply is
a. a cost of production
b. shared by all consumers of the production the input produces
c. zero
d. equal to the price of the input
CORRECT ANSWER: zero
1388. QUESTION: Holding everything else constant, the stock of capital would grow more slowly if there were
a. increased borrowing by the government
b. a lower equilibrium real interest rate
c. an increased supply of loanable funds
d. an increase in the marginal physical product of capital
CORRECT ANSWER: increased borrowing by the government
1389. QUESTION: A piece of improved land that has a marginal revenue product of $10,000 per year in perpetuity and that costs $50,000 has a rate of return of
a. 50%
b. 20%
c. 25%
d. 5%
CORRECT ANSWER: 20%
1390. QUESTION: If interest rates are expected to rise in the future then
a. the long-term interest rate will be higher than the short-term rate
b. long-term and short-term rates will be about equal
c. the short-term interest rate will be higher than the long-term rate
d. no one will buy long-term bonds
CORRECT ANSWER: the long-term interest rate will be higher than the short-term rate
1391. QUESTION: Human capital theory is concerned with all of the following except
a. investment in training and education
b. intangible capital formation
c. the distribution of income
d. investments in technology
CORRECT ANSWER: investments in technology
1392. QUESTION: The high short-run earnings of building owners in fast-growing sunbelt cities are an example of
a. quasi rents
b. pure economic rents
c. earnings made with a perfectly elastic supply curve
d. how only monopoly markets can earn economic profits
CORRECT ANSWER: quasi rents
1393. QUESTION: If the interest rate is 8%, then a loan of $400 will earn interest each year in the amount of
a. $8
b. $40
c. $32
d. $50
CORRECT ANSWER: $32
1394. QUESTION: An increase in the market rate of interest causes the rate of return on any specific capital project to
a. increase
b. decrease
c. change unpredictability
d. not change
CORRECT ANSWER: not change
1395. QUESTION: Pure economic rents are
a. payments to factors owned by entrepreneurs
b. only payments to land
c. payments to factors whose supply is perfectly inelastic
d. economic profits
CORRECT ANSWER: payments to factors whose supply is perfectly inelastic
1396. QUESTION: The best way to view the interest rate is that it is
a. the price of money
b. the price of credit
c. equal to the expected rate of inflation
d. the medium of exchange for present transactions
CORRECT ANSWER: the price of credit
1397. QUESTION: For the superstars of the sports and entertainment industries
a. economic rent is zero
b. a large fraction of their income is economic rent
c. opportunity cost is equal to their current salaries
d. opportunity cost is greater than their current salaries
CORRECT ANSWER: a large fraction of their income is economic rent
1398. QUESTION: IF the interest rate is 8%, then the percent value of a perpetual stream of payments of $1,000 each is
a. $8,000
b. $12,500
c. $10,000
d. $1,000
CORRECT ANSWER: $12,500
1399. QUESTION: In equilibrium, firms will undertake those investment projects that have
a. rates of return greater than the interest
b. positive rates of return
c. rates of return less than the interest rate
d. marginal revenue product greater than the interest rate
CORRECT ANSWER: rates of return greater than the interest
1400. QUESTION: In the 1970s, the price received by owners of oil-drilling equipment increased substantially because demand went up by short-term supply was quite inelastic. The increase income that they earned was
a. economic rents
b. quasi rents
c. profits
d. interest
CORRECT ANSWER: quasi rents
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