Macroeconomics
10th Edition
ISBN: 9780134896441
Author: ABEL, Andrew B., BERNANKE, Ben, CROUSHORE, Dean Darrell
Publisher: PEARSON
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Question
Chapter 4, Problem 7RQ
To determine
To explain: the desired capital stock and its dependence on the marginal product of capital, the user of capital, and the effective tax rate.
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Chapter 4 Solutions
Macroeconomics
Ch. 4 - Prob. 1RQCh. 4 - Prob. 2RQCh. 4 - Prob. 3RQCh. 4 - Prob. 4RQCh. 4 - Prob. 5RQCh. 4 - Prob. 6RQCh. 4 - Prob. 7RQCh. 4 - Prob. 8RQCh. 4 - Prob. 9RQCh. 4 - Prob. 10RQ
Ch. 4 - Prob. 1NPCh. 4 - Prob. 2NPCh. 4 - Prob. 3NPCh. 4 - Prob. 4NPCh. 4 - Prob. 5NPCh. 4 - Prob. 6NPCh. 4 - Prob. 7NPCh. 4 - Prob. 8NPCh. 4 - Prob. 9NPCh. 4 - Prob. 1APCh. 4 - Prob. 2APCh. 4 - Prob. 3APCh. 4 - Prob. 4APCh. 4 - Prob. 5APCh. 4 - Prob. 6APCh. 4 - Prob. 7APCh. 4 - Prob. 5WWMDCh. 4 - Prob. 6WWMD
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- Answer the following questions. (a) Can production satisfy both constant returns to scale and diminishing (marginal) returns to capital? (b) Observing a downward trend in the prices of capital goods, some companies decide to decrease or postpone their purchases of such goods. All else equal, will the real interest rate increase or decrease?arrow_forwardConsider a perpetuity with a coupon of 100. Imagine that the perpetuity is purchased at time t when the market interest rate is equal to 5%. Furthermore, imagine that the coupon income is taxed at 40% and that capital gains are taxed at 20%. What is the after tax rate of return if the perpetuity is sold at time t+1 when the market interest rate continues to be equal to 5%?arrow_forwardInvestors typically use which of these ratios in their analysis of a company's earnings potential? Check all that apply. Price ratios Price ratios Return ratios Return ratios Growth ratios Growth ratios Market value ratios Market value ratios Common ratios Common ratiosarrow_forward
- Explain Return on Invested Capital?arrow_forwardIn the market for loanable funds, there is a demand and supply of loanable funds represent as the following equations Demand:r 10.4-0.003Q Supply r=0.005Q What is the equilibrium interest rate in the market? You only need to provide the number and you do not need to multiply by 100% Instructions if the answer is not a whole number you should leave two numbers after the decimal Eg If the answer is 10.2778 it can be entered as 10.29 if negative write-10.28 Answerarrow_forwardExplain why a firm with $1 billion in the bank would care about the market interest rate when investing $10 million into a new building, after all they do not need to borrow money. When would the choose to undertake this investment project?arrow_forward
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