SOLVED

1) Investment spending in the U.S. ________ A) comprises the majority of total spending. B) is equal to approximately 15 percent of total spending. C) is equal to approximately 81 percent of total spending. D) is the smallest component part of household consumption spending. 2) Investment spending is a potent force in the macroeconomy, because ________. A) it is subject to large fluctuations B) it is larger than other spending categories C) it is the focus of macroeconomic policies D) it expresses entrepreneurial talent 3) The elements of investment spending are ________. A) calculated only in real terms. B) equivalent to their corresponding international transactions. C) consumption, government, exports and imports. D) highly procyclical. 4) Which of the following is not a component of investment spending? A) spending by firms on equipment. B) the purchase of 1000 shares of corporate stock. C) residential construction. D) changes in inventories. 5) Which of the following is a component part of investment spending? A) the purchase of a new microwave by a fast food restaurant. B) the purchase of 500 shares of corporate stock. C) the sale of 500 shares of corporate stock. D) all of the above. 6) The purchase and sale of financial instruments is not included in calculations of investment spending because ________. A) not all of these transactions are reported to the federal government. B) both foreign and domestic economic agents can engage in the described transactions, but only U.S. economic agents can engage in investment. C) they do not necessarily lead to a change in the amount of output produced in the United States. D) they are already including in consumption spending. 1) Once the marginal product of capital is equal to the real rental cost of capital ________. A) inventories will stabilize. B) depreciation will equal the marginal rate of substitution. C) the economy will reach full employment. D) a profit-seeking firm will stop acquiring capital. 2) If the marginal product of capital is greater than the rental cost of capital in terms of goods and services, then ________. A) the firm should continue to produce using that same amount of capital. B) the firm should add additional capital. C) the firm should reduce the amount of capital is is using. D) diminishing returns have been avoided 3) A firm possesses too much capital if ________. A) the real rental cost of capital is equal to the marginal product of capital. B) the real rental cost of capital is less than the marginal product of capital. C) its investment spending exceeds its consumption outlays. D) the real rental cost of capital is more than the marginal product of capital. 4) User cost is equal to ________. A) interest cost plus the expected rate of change in the real price of capital plus depreciation. B) interest cost minus the rate of depreciation. C) interest cost minus the expected rate of change of the real price of capital plus depreciation. D) interest cost plus depreciation. 1