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Exam 11: Input Demand: the Capital Market and the Investment Decision

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Question 111

Multiple Choice

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Ceteris paribus, when market interest rates ________, firms undertake ________ investment projects.

A) decrease; no
B) increase; more
C) decrease; less
D) increase; fewer

E) None of the above
F) All of the above

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Question 112

Multiple Choice

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If the interest rate is 15%, the current market value of $1 to be delivered in one year is

A) $0.87.
B) $0.91.
C) $1.00.
D) $1.15.

E) B) and D)
F) A) and B)

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Question 113

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The payment made for the use of money is called

Households receive bonds when they loan money directly to a firm.

Refer to the data provided in Table 11.4 below to answer the following question(s) . Table 11.4 $\begin{array}{l}\begin{array} { l c c } &\text { Total Investment }&\text {Expected Rate of Return }\\ { \text { Project } } & \text { (dollars) } & \text { (percentage) } \\\hline \text { New bookkeeping software } & \$ 300,000 & 10 \\\text { New tractor } & \$ 400,000 & 24 \\\text { New grain storage tanks } & \$ 500,000 & 20 \\\text { Irrigation system } & \$ 1,000,000 & 30\end{array}\end{array}$ -Refer to Table 11.4. When the interest rate ________, the farmer will engage in no investment.

The formula for present discounted value is ________, where R dollars is to be paid t years in the future and the agreed upon interest rate is r.

You take a class that improves your critical thinking skills. This represents an investment in your

________ is an example of tangible capital.

Those goods produced by the economic system that are used as inputs in the production of future goods and services are known as capital.

A firm's ________ is measured as a stock while ________ is measured as a flow.

As the inventory of a firm falls

The stock market, banks, and savings and loans are three examples of institutions that economists would classify as belonging to the financial

All else equal, more investment takes place at

Related to the Economics in Practice on page 235: In 2010, Tesla Motors decided to become a public company by offering shares of stock to the public on a stock exchange. The process of doing this is called

If the interest rate is 12%, the current market value of $1 to be delivered in one year is

In the capital market, households ________ supply the financial resources to firms that allow them to purchase ________.

Physical capital refers to material things used as inputs in the production of future goods and services.

A company requires that all new employees become certified in using Microsoft Office. This investment is in ________ capital.