Fluctuations in Tobin’s q are ________, because ________. A) frequent and substantial; asset prices are volatile B) frequent and substantial; replacement costs are volatile C) infrequent and mild; replacement costs are relatively stable D) infrequent and mild; the marginal product of capital does not change quickly ANSWER A
If the correlation between GDP and y is 0, we say y is A) procyclical. B) acyclical. C) countercyclical. D) tricyclical. ANSWER B
The level of income is unchanged in response to unanticipated anti-inflation policy in ________. A) real business cycle theory B) traditional Keynesian theory C) new Keynesian theory D) post classical theory ANSWER A
An increase in inflation leads to higher ________. A) output B) spending C) real interest rate D) all of the above E) none of the above ANSWER C
When is a firm more likely to engage in excessively risky behaviors, when business is well, or when it is facing financial distress? What will be an ideal response? ANSWER Financial distress is a cause of moral hazard. Even heretofore prudent managers are tempted to take drastic action with the hope that a big […]
A rise in stock prices leads to ________. A) an increase in income B) an increase in Tobin’s q C) a decrease in Tobin’s q D) a decrease in income ANSWER B
If deviations from trend in a macroeconomic variable are positively correlated with deviations from trend in real GDP, that variable is said to be A) useful in predicting future movements in real GDP. B) procyclical. C) countercyclical. D) acyclical. ANSWER B
A hard peg may be achieved by all of the following except A) following the rules of the Bretton Woods Agreement. B) dollarization. C) establishing a currency board. D) mutual agreements establishing a common currency. ANSWER A
When Tobin’s q is greater than one, ________. A) a unit of a firm’s stock (equity) is worth more than a unit of the firm’s capital B) a new unit of capital has more value than a new unit of stock (equity) C) installed capital is worth less than new capital D) a unit of […]
Credibility is not important in ________. A) new Keynesian and traditional Keynesian theory B) real business cycle and traditional Keynesian theory C) real business cycle and new Keynesian theory D) traditional Keynesian, new Keynesian and real business cycle theory ANSWER B
