Macroeconomics (Fourth Edition)
4th Edition
ISBN: 9780393603767
Author: Charles I. Jones
Publisher: W. W. Norton & Company
expand_more
expand_more
format_list_bulleted
Question
Chapter 17, Problem 6E
(a)
To determine
The result of an increase in the total factor productivity and investment on the desired capital stock.
(b)
To determine
The effect of an uptick in the total factor productivity and investment.
(c)
To determine
The effect of an improvement in the total factor productivity on investment in the long run.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Looking at business fixed investment, elaborate on why investment is negatively related to theinterest rates.b. Using the Tobin’s q theory, elaborate on the relationship between investment and capitalstock?c. If the market value of firm A is $1.5 million and the replacement cost of capital is $450,000, find the Tobin's q.d. Should the firm replace capital? Elaborate on your response.
Explain the short-run and long-run effects of an exogenous decrease in investment by explanation and using graphical analysis.
If firms produce goods but does not sell them to final consumers these increases in inventory accumulation are counted as
A.) Business investment
B.) Depreciation
C.) Research and development cost
D.) Government spending
Chapter 17 Solutions
Macroeconomics (Fourth Edition)
Knowledge Booster
Similar questions
- 2. What would be the impact of changing the determinant variables given in the first column (below) on investment? Factors affecting Investment Effect on Investment decrease in interest rate Increase in interest rate Increase in prices of capital goods There is no technology available in the country Demand for consumer goods decrease Government decided to increase corporation tax Increase in Subsidiesarrow_forwardExplain the determinants of investment. Include in your answer an explanation of how a change in each determinant affects investment.arrow_forwardDefine and explain the internal rate of return on a new investment?arrow_forward
- In what direction will each of the following occurrences shift the investment demand curve, other things equal? a. An increase in unused production capacity occurs. b. Business taxes decline. c. The cost of equipment fall. d. Widespread pessimism arises about future business conditions and sales revenue. e. A major new technological breakthrough creates prospects for a wide range of profitable new products.arrow_forwardI have worked on 1-3, but am stuck on 4-6, could you please assist? Suppose that the economy is summarized by the following: Technology (Production Function): Yt = 10 (Kt)0.3 (Lte)0.7 Consumption function: Ct = 0.8Yt Depreciation rate: 8% (i.e. δ= 0.08) Population growth: 2% (i.e. n = 0.02) Technological growth: 4% (i.e. g = 0.04) QUESTIONS: Find the steady state (long run) equilibrium values of kte, yet, and cet. Show graphically what would be the effect of a increase of the saving rate to s=0.4? Show graphically what would be the effect of an increase in population growth to 0.04? Assuming that in 2013 the US economy is in the steady state and L2013 = Le2013 = 8, what is the value of ke2014, ye2014, ce2014 , k2014, y2014, and c2014 ? Use your answer to e) to calculate the growth rate of ket, yet, cet , kt, yt, and ct Based on your answers to the previous questions and on your knowledge of how the Solow growth model works, explain what policies should a less-developed country…arrow_forwardEconomics 1) Draw a saving-investment diagram to show how each of the following changes shifts the IS curve. (a) Future income rises. (b) The future marginal productivity of capital increases. (c) Government purchases decrease temporarily. (d) The effective corporate tax rate increases.arrow_forward
- Distinguish between nominal and real interest rates. Which is more relevant in making investment and R&D decisions? If the nominal interest rate is 12 percent and the inflation rate is 8 percent, what is the real rate of interest?arrow_forwardb. Explain the difference between saving and investment as defined by a macroeconomist. c. Which of the following situations in c (i) & c (ii) represent investment? Saving? Explain(i) Your family takes out a mortgage and buys a new house. (ii) You use your paycheque to buy stock in Sagicor Financial Services.arrow_forwardAssume that a national restaurant chain called BBQ builds 20 new restaurants at a cost of $1 million per restaurant. It outfits each restaurant with an additional $200,000 of equipment and furnishings. To help partially defray the cost of this expansion, BBQ issues and sells 400,000 shares of stock at $30 per share. Instructions: Enter your answers rounded to 1 decimal place. a. What is the amount of economic investment that has resulted from BBQ's actions? million b. How much purely financial investment took place? $ million %24 %24arrow_forward
- Investment is: A. Education, any new plant, equipment, additional inventory, computer software, or residential housing B. Any new stocks and bonds, plant, equipment, additional inventory, computer software C. Any new plant, equipment, additional inventory, computer software, or residential housing D. Any new plant, equipment, employee training, additional inventory, computer software, or residential housing E. All of the abovearrow_forwardHow is optimal investment for the firm affected by an increase in the current capital stock? A. The demand for investment goods will increase along the optimal investment schedule. B. The optimal investment schedule shifts to the right. For each level of investment, the future marginal product of capital will increase. C. The demand for investment goods will decrease along the optimal investment schedule. D. The optimal investment schedule shifts to the left. For each level of investment, the future marginal product of capital will decrease.arrow_forwardUsing quarterly data from 1947 to the present, graph residential fixed investment relative to GDP a. Compare the graph of residential investment relative to GDP to a graph of the civilian unemployment rate. What happens to residential investment during recessions? In this respect, is residential investment similar to or different from other types of investment? b. During the two decades after World War II, there was an upsurge in population growth and household formation known as the “baby boom.” The baby boom was followed by a “baby bust” during which population growth slowed. How are these demographic trends connected to the behavior of residential investment relative to GDP shown in your graph?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Microeconomics: Private and Public Choice (MindTa...EconomicsISBN:9781305506893Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage LearningEconomics: Private and Public Choice (MindTap Cou...EconomicsISBN:9781305506725Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
Microeconomics: Private and Public Choice (MindTa...
Economics
ISBN:9781305506893
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning
Economics: Private and Public Choice (MindTap Cou...
Economics
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning