BUAD 352 Midterm

60%

Calculate the percentage change in real GDP Milk Year 1 Quality 500, Price 2 Milk Year 2 Quantity 900 Price 3 Butter Year 1 Quantity 2000 Price 1 Butter Year 2 Quantity 3000 Price 2 Between Year 1 and Year 2,

1000

Calculate the user cost of capital of a machine that costs 5000 and depreciates at a 25% rate, when the nominal interest rate is 5% and the expected inflation rate is 10%.

1500

Calculate the user cost of capital of a machine that costs 5000 and depreciates at a rate of 25%, when the real interest rate is 5%.

5 Million

Carl's Computer Center (CCC) sells computers to business firms. Businesses then use the computers to produce other goods and services. Over the past year, sales representatives of CCC were paid 3.5 million, .5 million went for rent of the building, .5 million went for taxes, .5 million was profit for CCC, and 10 million was paid for computers at the wholesale level. What was the firm's total contribution to GDP.

6 Billion

Suppose the economy is in a goods market equilibrium. Its output is 35 billion, government purchases are 10 billion, desired consumption is 15 billion, and current account balance is 4 billion. Then desired investment equals

A) 246 B) 20% C) 2.9%

Suppose the economy's production function is Y=AK^.3,N^.7, where Y is output, A is total factor productivity, K is capital and N is Labor. Let K=2000, N=100, and A=1. A) What is the level of output B) If K and N both rise by 20%, and A is unchanged, by how much does Y increase? C) If K rises by 10% and A and N are unchanged, by how much does Y increase?

A) 0% B) 25%

A country has produced the following quantity of gauges and potatoes with the price of each listed in dollar terms: Gauges Year 1 Quantity 8000 Price 4 Gauges Year 2 Quantity 10,000 Price 3 Potatoes Year 1 Quantity 6000 Price 8 Potatoes Year 2 Quantity 5000 Price 14 A) Using year 1 as the base year, what is the growth rate of real GDP from year 1 to year 2.

688.9

An economy has government purchases of G=2000. Desired national saving and desired investment are given by: S=200+5000r+.1Y-.2G I= 1000-4000r Where r is the real interest rate and Y is output. If Y=5000, then the level of investment when the goods market is in equilibrium will be

C

An economy has output of Y=5000. Government purchases are G=1000. Desired consumption and desired investment are given by C= 3000=2000r+.10Y I=1000-4000r Where r is the real interest rate. The real interest rate that clears the goods market is equal to

Is too small to affect the world real interest rate

An economy is considered a small open economy if it

25 Million

At the start of the year, your firm's capital stock equaled 100 million, and at the end of the year it equaled 105 million. The average depreciation rate on your capital stock is 20%. This implies that gross investment during the year was

A)Saving curve shifts left, so S falls, I is unchanged, CA falls. B) Investment curve shifts left, so S is unchanged, I falls, CA rises. C) Investment curve shifts right, so S is unchanged, I rises, CA falls.

Consider a small open economy in an equilibrium with a zero current account balance. What happens to national saving, investment, and the current account balance in equilibrium if A) future income rises? B) business taxes rise? C) the future marginal product of capital rises?

-50

Consider a small open economy with desired national saving of S=200 + 10,000r^w and desired investment of I=1000=5000r^w. If r^W = .05, then the current account balance is equal to

Use CA = S - I A) S = 1025, I = 987.5, CA =37.5. B) S = 1050, I = 975, CA = 75. C) S = 1000, I = 1000, CA = 0.

Consider a small open economy with desired national saving of Sd = 1000 + 1000rw and desired investment of Id = 1000 - 500rw. Calculate national saving, investment, and the current account balance in equilibrium when the real world interest rate is A) rw = 0.025. A) rw = 0.05. C) rw = 0.0.

103.05

Consumers in an economy buy apples and oranges.n year 2015, they buy 7 apples at $0.50 each and 5 oranges at $0.60 each. In year 2016, due to weather conditions in producing areas apples become more expensive and cost $0.60 each, while oranges become cheaper and cost $0.45 each. Consumers respond to prices and change their habits by consuming 6 apples and 6 oranges. In year 2017, prices further change to $0.62 per apple and $0.47 per orange, but consumption remains unchanged relative to 2016. Let 2015 be base period, so that CPI is equal to 100 in 2015. (a) Calculate CPI for 2016 and 2017 using the consumption basket of year 2015

340

Consumption is 250, investment in 50, government purchases are 60, exports are 50, and imports are 70. How much is GDP.

100,000

Fred the farmer purchased five new tractors at 20,000 each. Fred sold his old tractors to other farmers for 50,000. The net increase in GDP due to these transactions was

Capital Goods

Goods used to produce other goods

Falls

In a closed economy, if consumers believe that next year a recession will occur, then the real interest rate

Government Payments for Welfare

In the expenditure approach to GDP, which of the following is excluded from measurements of GDP. Government payments for goods produced by foreign firms Government payments fro goods produced by firms owned by state or local governments Government payments for welfare All government payments are included in GDP.

Shift the saving curve to the right

In the saving-investment diagram, an increase in current output would

2.6%

Over the past year, output grew 6%, capital grew 2%, and labor grew 4%. If the elasticities of output with respect to capital and labor are 0.3 and 0.7, respectively, how much did productivity grow?

900 Fish

Monica grows coconuts and catches fish. Last year, she harvested 1500 coconuts and 600 fish. She values one fish as having a worth of three coconuts. She gave Rachel 300 coconuts and 100 fish for helping her to harvest coconuts and catch fish, all of which were consumed by Rachel. In terms of fish, Monica's income is

.5

Last year, Linus earned a salary of 25,000 and he spent 24,000, thus saving 1000. At the end of the year, he received an unexpected bonus of 1000 and he spent 500 of it, saving the other 500. What was is marginal propensity to consume?

2.7%

Over the past year, output grew 4%, capital grew 2%, and labor grew 1%. If the elasticities of output with respect to capital and labor are 0.3 and 0.7, respectively, how much did productivity grow?

Some useful goods and services are not sold in market

One problem with using market values to measure GDP is that

A) S=-454

Sally will earn 30000 this year and 40000 next year. The real interest rate is 20% between this year and next year; she can borrow or lend at this rate. She has no wealth at the start of this year and plans to finish next year having consumed everything she possibly can. She would like to consume the same amount this year as next year. The inflation rate is 0% A) How much should Sally save this year? How much will Sally consume in each of the two years? B) How would your answers change if the real interest rate was 40%

A) -60 B) 60 C) -20 D) -40

Suppose a country has the following balance of payments data Exports of Goods 100 Imports of Goods 130 Service Exports 60 Service Imports 50 Income Receipts from Abroad 75 Income payments to foreigners 115 Increase in home country assets abroad 130 Increase in foreign assets in home country 190 A)Calculate the current account balance B) Calculate the financial account balance C) Calculate the trade balance D) Calculate net factor payments

4 Billion

Suppose output is 35 billion, government purchases are 10 billion, desired consumption is 15 billion, and desired investment is 6 billion. Net foreign lending is

5575

Suppose the current level of output is 5000. If the elasticities of output with respect to capital and labor are 0.3 and 0.7, respectively, a 10% increase in capital combined with a 5% increase in labor and a 5% increase in productivity would increase the current level of output to

Tendency of workers to supply less labor in response to becoming wealthier

The income effect of a higher real wage on the quantity of labor supply is the

397

The labor demand is given by N= 400 - w/A where A measures productivity and N is the number of workers. Suppose that A=2. What will be the demand for labor if the real wage is 6?

A) 10 B) 380 C) 15.79, 426.32 D) 20, 420 E) No

The labor demand is given by N=400-2w where N is aggregate employment and w is the real wage. The supply is given by N=300 +8w A) What is the equilibrium real wage? B) What is the equilibrium real wage? C) Suppose that, thanks to a technological invention, firms become more productive and their labor demand curve changes to N=450-1.5w. What are the equilibrium wage and employment D) Thanks to an invention, workers become wealthier and don't want to work as much as they used to. Their labor supply falls to N=260 + 8w. What are the equilibrium wage and employment? E) Suppose that the government introduces a minimum wage equal to 22. Can the labor market attain an equilibrium?

Real Interest Rate

The nominal interest rate minus the inflation rate is the

Adds together the market values of final goods and services produced by domestic and foreign owned factors of production within the nation in some time period.

The product approach to calculating GDP

-1.5%

The table below represents national macroeconomic data for Year 1 and Year 2. Year 1 Y=2000, K=1700, N=70 Year 2 Y=2100, K=1785 N=75 Suppose that the production function is given by Y=AK^.25,N^.75. Between Year 1 and Year 2, the total factor productivity of this economy changed by

Product, income, and expenditure approach

The three approaches to measuring economic activity are the

Invest more, because the value of additional units of capital is larger than the cost

Tobin's q is the ratio between the market value of a firm's capital and the replacement cost of capital. If q is larger than 1, the firm should:

9%, 1%

Tony buys a one-year German government bond for 400. He receives principal and interest totaling 436 one year later. During the year the CPI rose from 150 to 162. The nominal interest rate on the bond was ______, and the real interest rate was _____

A) The rise in output raises desired saving, shifting the Sd curve to the right; in equilibrium, this reduces the real interest rate, increasing investment as well. B) The rise in taxes reduces desired investment, shifting the Id curve to the left; in equilibrium, this reduces the real interest rate, reducing saving as well as investment. C) The rise in future marginal productivity of capital raises desired investment, shifting the Id curve to the right; in equilibrium, this raises the real interest rate, increasing saving as well as investment

Use a saving investment diagram to explain what happens to saving, investment, and the real interest rate in each of the scenarios in a closed economy A) Current output rises due to a temporary productivity increases. B) The tax code changes so that business firms face higher tax rates on their revenue ( offset by other lump-sum tax changes so there's no overall change in government spending) C) The average educational level rises, inducing an increase in the future marginal productivity of capital.

Net investment = gross investment minus depreciation

What is the difference between gross investment and net investments

A newly constructed house

Which of the Following is included in US GDP The sale of a new car from a U.S. manufacturing factory The purchase of a watch from a Swiss company The sale of a used car A newly constructed house

Countries' current accounts become smaller

Which of the following is not a benefit of globalization? A) lower consumer prices due to global competition B) higher specialization among countries allows higher global output due to comparative advantage C) countries' current accounts become smaller D) poor countries have a chance to catch up with the rich thanks to international trade

Decline in net unilateral transfers

If the United States sends foreign aid to the Central African Republic, how is the transaction recorded on the U.S. balance of payment accounts

Real domestic interest rates to rise

A large country imposes capital controls that prohibit foreign borrowing and lending by domestic residents. The country is currently running a financial account surplus. The imposition of the capital controls will cause

Lends or borrows enough in the international capital market to influence the world real interest rate.

A large open economy

.1

A large open economy has desired national saving of Sd = 1200 + 1000rw, and desired national investment of Id = 1000 - 500rw. The foreign economy has desired national saving of SFor = 1300 + 1000rw, and desired national investment of IFor = 1800 - 500rw. The equilibrium world real interest rate equals

Fall; Rise

A large open economy increases its desired saving. This causes the world real interest rate to ________ and the country's current account balance to ________.

Shift the production function down and decrease the marginal product of labor at every level of employment

A negative supply shock would

Reduce Productivity

A new pollution law requires businesses to pay for inspections of their plants by independent pollution-monitoring firms. What effect is this likely to have?

A) 1250 B) 2940

A profit maximizing firm has current and future marginal productivity of capital given by MPK=10000-2k+N and the marginal productivity of labor is given by MPN = 50-2N+K. The price of a unit of capital is 5000, the real interest rate is 10% and capital depreciates at a 15% rate. The real wage rate is 15% A) Calculate the user cost of capital B) Find firms optimal amount of employment and the size of the capital

Production Function

A relationship between the amount of output produced and quantities of capital and labor utilized is the

Fall; remain unchanged or fall

A small open economy reduces its desired saving. This causes the world real interest rate to ________ and the country's current account balance to ________

A) .0833 B) C= 3333 I=667 S=667 C) C=3200 I=800 S=800

An economy has output of 5000. Government purchases are 1000. Desired consumption and desired investment are given by C=3000-2000r+.1Y I=1000-4000r Y is output and r is the expected real interest rate A) Find the real interest rate that attains an equilibrium in the goods market. B) Calculate the amount of saving, investment, and consumption in equilibrium. C) If a shock to wealth causes the desired consumption to fall to the level of C=2800-2000r+.10Y, find the equilibrium real interest rate, saving, investment, and consumption.

Increase today's desired consumption and decrease the desired national saving.

An increase in expected future output while holding today's output constant would

Decrease the desired capital stock

An increase in the expected real interest rate

Increase the user cost of capital

An increase in the price of capital goods will

Movement along the labor demand curve, causing a decrease in the numbers of workers hired by the firm

An increase in the real wage would result in

A Supply Shock

An invention that speeds up the Internet is an example of

6.5%

If the expected inflation rate was 2.5%, the expected real interest rate was 4%, and the real interest rate turned out to be 5.1%, the the nominal interest rate equals.

40%

If the price index last year was 1.0 and this year it is 1.4, what is the inflation rate over this period

Rises; falls

If the rate of depreciation increases, then user cost _____ and the desired capital stock ______

Imports into French exceed exports from France

If France has a trade deficit, then

Shifts to the left

If a country's working-age population declines and its wealth increases, then the labor supply curve

A current account surplus

If a small open company has a current account balance of zero, a rise in the world interest rate would lead to

Net borrowing from abroad

If a small open economy has a current account balance of zero, a rise in its investment demand would cause

Unknown based on the given information

If nominal GDP for 2009 is 6400 billion and nominal GDP for 2010 is 6720 billion, then the growth rate of real GDP is

Rises; Falls

If the United States sells computers to Russia, and uses the proceeds to buy shares of stock in Russian companies, the U.S. trade balance ______ and the U.S. financial account balance ______

A fall in both government purchases and expected future output

Desired national saving would increased unambiguously if there were

A) U.S. trade balance and current account rise $2 million, financial account is unchanged.Mexican trade balance and current account decline by 4 million pesos, financial account is unchanged. B) U.S. trade balance and current account decline by $200,000, financial account is unchanged.Mexican trade balance and current account rise by 400,000 pesos, financial account is unchanged. C) U.S. trade balance and current account balance rise by $600,000, financial account is unchanged.Mexican trade balance and current account balance fall by 1.2 million pesos, financial account is unchanged. D) U.S. trade balance is unchanged, current account balance rises by $25,000, financial account is unchanged. This transaction is falls into net unilateral transfers.Mexican trade balance is unchanged, current account balance declines by 50,000 pesos, financial account is unchanged. E) U.S. trade balance and current account are unchanged, financial account balance goes up by $10 mln.Mexican trade balance and current account are unchanged, financial account balance falls by 20 mln pesos.

For each of the following transactions, explain what happens to the trade balance, current account balance, and financial account balance in both the United States and Mexico. The exchange rate is 2 Mexican pesos per 1 U.S. dollar. A) A Mexican firm spends 4 million pesos to buy equipment from a U.S. firm. B) A U.S. firm buys 20,000 sombreros at 20 pesos each. C) Mexican computer firms send 200 programmers to universities in the United States, paying tuition and expenses of $3000 each.(d) A Mexican entrepreneur donates 50,000 pesos to the United Way of San Antonio, Texas. E) Mexican investors buy $10 million worth of 30-year U.S. Treasury bonds from an investment bank in New York.

Intermediate Goods

Goods that can be used in the production of other goods only once.

Reducing the government budget surplus

Government policies to raise the rate of productivity growth include all of the following except: A) improving infrastructure B) encouraging research and development C) reducing the government budget surplus D) improving human capital development.

Greater, Less

In 2008, expected inflation exceeded inflation. In 2009, inflation exceeded expected inflation. Therefore, the real interest rate was ________ than the expected real interest rate in 2008 and the real interest rate was ________ than the expected real interest rate in 2009.

Falls; Declines

In a closed economy, onerous regulations on businesses that take effect next year reduce businesses' expected future marginal product of capital. As a result the real interest rate ______ and saving _______

285

In a given year, a country's GDP = 9841, net factor payments from abroad = 889, taxes = 869, transfers received from the government = 296, interest payments on debt = 103, consumption = 8148 and government purchases = 185. The country had government savings equal to

2112

In a given year, a country's GDP = 9841, net factor payments from abroad = 889, taxes = 869, transfers received from the government = 296, interest payments on debt = 103, consumption = 8148 and government purchases = 185. The country had private savings equal to

The desired amount of national savings equals the desired amount of domestic investment plus the amount lent abroad

In a goods market equilibrium in an open economy,

Reduce investment and reduce the current account balance

In a large open economy like the United States, an increased government budget deficit which reduces national saving should also

The world real interest rate must rise.

In a model with two large open economies, if desired international borrowing by the domestic country exceeds desired international lending by the foreign country, then

Desired international lending by one country equals desired international

In a model with two large open economies, the world real interest rate is such that

The marginal product of labor and the real wage rate

In a perfectly competitive market, which two variables should a profit-maximizing firm set equal to each other when deciding how many workers to employ?

A) CA = S - I = $4 billion B) NX = CA - NFP - NUT = $4 billion C) C = Y - I - G - NX = $36 billion

In a small open economy, Sd = $5 billion + ($100 billion) × rw Id = $10 billion - ($50 billion) × rw Y = $50 billion,G = $3 billion, rw = .06, and net factor payments and net unilateral transfers are zero A) Calculate the current balance account B) Calculate Net Exports (c) Calculate Desired Consumption.

The world interest rate would increase

In a two-economy model of the United States and another large economy made up of the rest of the world, if desired saving by the rest of the world declined

If w>MPN, the cost (w) of hiring additional workers exceeds the benefits (MPN) of hiring them, so they should hire fewer workers.

One reason that firms hire labor at the point where the real wage is equal to the marginal product of labor, i.e w=MPN is

When countries specialize, they can raise their combined output and consumption

One result of the theory of comparative advantage is that

2.8%

Over the past year, output grew 5%, capital grew 5%, and labor grew 1%. If the elasticities of output with respect to capital and labor are 0.3 and 0.7, respectively, how much did productivity grow?

4%

Over the past year, productivity grew 1%, capital grew 0%, and labor grew 5%. If the elasticities of output with respect to capital and labor are 0.4 and 0.6, respectively, how much did output grow?

3%

Over the past year, productivity grew 1%, capital grew 2%, and labor grew 2%. If the elasticities of output with respect to capital and labor are 0.3 and 0.7, respectively, how much did output grow?

3%

Over the past year, productivity grew 2%, capital grew 1%, and labor grew 1%. If the elasticities of output with respect to capital and labor are 0.2 and 0.8, respectively, how much did output grow?

6 Million

Sam's Semiconductors produces computer chips, which it sells for $10 million to Carl's Computer Company (CCC). CCC's computers are sold for a total of $16 million. What is the value added of CCC?

Increased; Did not change much

Since the 1980s the nominal wage of a median worker in the U.S. has _____, while the real wage of a median worker in the U.S. has _____

A) 150 B) 100 C) 180

Suppose a profit-maximizing firm's hourly marginal product of labor is given by MPN=A(200-N) A) If A=.2 and the real wage rate is 10 per hour, how much labor will the firm want to hire. B) Suppose the real wage rate rises to 20 per hour. How much labor will the firm want to hire? C) With the real wage rate at 10 per hour, how much labor will the firm want to hire if A rises to .5?

210

Suppose an economy has output of 2100, government spending of 40, consumption of 1600, and investment of 300. A) Calculate net exports B) Now suppose that output grows to 2200, government spending and investment remain the same, and the marginal propensity to consume is .5. Calculate net exports

A) 100.23 B) 2.65% C) .89%

Suppose that an economy has this production function Y=AK^.3,N^.7 where Y is output, A is total factor productivity, K is capital and N is labor. In 2015, A=2, K=10 and N=100 A) What is GDP in 2015 B) In 2016, TFP grows by 2%, capital stock increases by 1.2%, and labor supply grows by .4%. What is the growth rate of GDP? C) Suppose that the government targeted a 3% GDP growth for 2016 and lets assume that the government cannot affect TFP and capital growth, so they grow by 2% and 1.2% as in the previous case. The government however, can increase labor supply by lowering the personal income tax. By how much should the government increase labor force in order to achieve the 3% GDP growth target?

An increase in the world interest rate

Suppose the development of the European Union leads to a greater demand for investment in Europe. You'd expect

-50 Billion

Suppose the economy is in a goods market equilibrium. Its output is 1000 billion, government purchases are 200 billion, desired consumption is 700 billion, and desired investment is 150 billion. Net foreign lending would be equal to

A) A is unchanged B) A is doubled

Suppose the production function is AK^.3,N^.7, where Y is output, A is total factor productivity, K is capital, and N is labor. Suppose in year 2000, K=1000, N=100, and Y=199.5, In year 2010, capital, labor, and output have doubled, so K= 2000, N=200, and Y=399 A) By what percentage did productivity grow from 2000 to 2010? B) If output had risen to 798 instead of 399, and capital and labor doubled, by what percentage would productivity have grown from 2000 to 2010.

A) S= 250,000 Cr= 375,000 Cw= 750,000 B) S= 500,000 Cr=750,000 Cw= 1,500,000 C) S=125,000 Cr=437,500 Cw= 875,000 D) Substitution effect is absent because the consumption shares across the two periods are unchanged.

Suppose you divide your life into two periods: working age and retirement age. When you work, you earn labor income Y; when retired, you earn no labor income, but must live off your savings and the interest it earns. You have no initial assets. You save the amount S while working, earning interest rate r, so you have (1+r)S to live on when retired. Because you decide that you don't want to consume much when retired, you want to set consumption when working twice as much as consumption when retired. A) suppose you earn 1 million over your working life and the real interest rate for retirement is 50%. How much will you save, and how much will you consume in each part of your life? B)Suppose your current income when working is 2 million instead of 1 million. Now what will you save and how much will you consume each period? C) Suppose a social security system will pay you 25% of your working income when you are retired. Now (with Y=1 million as in part a) how much will you save and how much will you consume each period. D) Suppose the interest rate rises. Will you save more or less, assuming that you will still want to consume twice more in the first period of your life.

600 Million

The Bigdrill company drills for oil, which it sells for 200 million to the Bigoil company to made into gas. The Bigoil company's gas is sold for a total of 600 million. What is the total contribution to the country's GDP from companies Bigdrill and Bigoil

39,000

The Compagnie Naturelle sells mounted butterflies. The only input it uses is butterfly bait it buys from another firm for $20,000. It pays its workers $35,000, pays $1000 in taxes, and has profits of $3000. What is its value added?

Increase the steady-state consumption per worker if the capital-labor ratio is below the Golden rule capital stock

The Golden rule capital stock is the level of capital-labor ratio where consumption is maximized. According to the Solow model, an increase in the capital-labor ratio will

Total amount of the labor supplied by everyone in the economy

The aggregate supply of labor is the

190%

The country of Old Jersey produces milk and butter, and it has published the following macroeconomic data, where quantities are in gallons and prices are dollar per gallon: Milk Year 1 Quality 500, Price 2 Milk Year 2 Quantity 900 Price 3 Butter Year 1 Quantity 2000 Price 1 Butter Year 2 Quantity 3000 Price 2 Between Year 1 and Year 2, nominal GDP grew by

The consumption-smoothing motive

The desire to have a relatively even pattern of consumption over time is known as

Future marginal product of Capital increases

The desired level of capital stock will increase if the

There is diminishing marginal productivity of capital

The fact that the production function relating output to capital becomes flatter as we move from left to right means that

397

The marginal product of labor is given by w= A (400-n) where A measures productivity and N is the number of workers used in production. Suppose that A=2. What will the demand be for labor if the real wage is 6

Causes the total amounts of saving and investment to fall.

The savings investment diagram shows that a higher real interest rate due to a leftward shift of the saving curve

Many individuals had invested in the stock market immediately prior to the crash

The stock market just crashed; the Dow Jones Industrial Average fell by 750 points. You would expect the effect on aggregate consumption to be the largest if which of the following facts was true In response to the stock market crash the government reduced income taxes Most stocks were owned by insurance companies Most stocks were owned by foreign investment firms Many individuals had invested in the stock market immediately prior to the crash

5

The upstart company has the following production function Workers 0 Cases 0 Workers 1 Cases 10 Workers 2 Cases 19 Workers 3 Cases 26 Workers 4 Cases 31 Workers 5 Cases 34 If the company maximizes profit by hiring 4 workers

Wealth

The value of a household's asset minus the value of its liabilities is called

The goods market

When desired national savings equals desired national investment in a close economy, what market is in equilibrium.

The value of its exports exceeds the value of its imports, while net income from foreign assets and net unilateral transfers have a value of zero.

Which of the follow statements are true A country has a current account surplus if A) The value of its exports exceeds the value of its imports, while net income from foreign assets and net unilateral transfers have a value of zero. B) the value of its net exports of services exceeds the value of its net exports of goods. C) it receives more income from foreign assets than it pays to foreigners for foreign- owned domestic assets. D) its capital inflows exceed its capital outflows.

Machine B

Which of the following machines has the lowest user cost? Machine A costs 15000 and depreciates at a 25% rate, machine B costs 10000 and deprecates at a rate of 20%, machine C costs 20,000 and depreciates at a rate of 10%, and machine D costs 17,000 and depreciates at a rate of 11%. The expected real interest rate is 5%.

A US resident makes a deposit in a foreign bank

Which of the following transactions is not included in the current account of the US? A) A consumer good is imported into the US. B) A US resident makes a deposit in a foreign bank. C) A foreign student pays tuition to a university in the US. D) A US resident receives income on his or her foreign assets.

The future marginal product of capital is greater than the user cost of capital

You are trying to figure out how much capacity to add to your factory. You will increase capacity as long as