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Looking at business fixed investment, elaborate on why investment is negatively related to the
interest rates.
b. Using the Tobin’s q theory, elaborate on the relationship between investment and capital
stock?
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.
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- 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.In an economy, the future marginal product of capital is MPKf=100-K, where K denotes the future capital stock. The price of capital is 100, the depreciation rate of capital is 0.1 and the current capital stock is 10. An equation relating desired investment (I) to real interest rate (r) isIf business managers become more optimistic about future sales and profits, then there will be O no movement along or shift of the investment function an upward shift of the investment function a downward shift of the investment function a leftward movement along the investment function O a rightward movement along the investment function Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
- Explain the short-run and long-run effects of an exogenous decrease in investment by explanation and using graphical analysis.The position of IS curve depends on_______. Select one: a. none of the given options b. rate of investment, c. rate of interest, d. autonomous expenditureHow will planned investment spending change as the following events occur? a) The interest rate falls as a result of Federal Reserve policy. b) The U.S. Environmental Protection Agency decrees that corporation must upgrade or replace their machinery in order to reduce their emissions of sulfur dioxide. c) Baby boomers begin to retire in large number and reduce their savings, resulting in higher interest rates. Thank you very much for your help.
- A rightward shift of the investment demand curve would be caused by a(an) a. increase in the expected rate of return on investment caused by an increase inbusiness confidence.b. decrease in the expected rate of return on investment caused by a decrease inbusiness confidence.c. increase in the rate of interest.d. decrease in the rate of interestWhen economists say “investment,” they are referring to financial investments, which are purely financial transactions, such as swapping cash for a stock or a bond. Select one: a. True b. FalseThe national saving schedule (S) is usually drawn with a positive slope because: a. the value of the marginal product of capital is high when the real interest rate is high b. the demand for investment schedule shifts to the right when the real interest rate increases c. the private sector has a greater incentive to save when the real interest rate is high d. firm’s demand for investment is high when the real interest rate is high
- A decline in the interest rate, other things constant, shifts the investment schedule downward. O True O Falsea. Looking at business fixed investment, explain why investment is negatively related to the interest rates.b. Using the Tobin’s q theory, explain the relationship between investment and capital stock?The firm you work for wants you to provide some insight into the investment environment in Mexico before deciding to enter the market. You conduct some research and find a large dispersion of MRPK across firms in Mexico. You also notice that state-owned firms have lower MRPK. Which of the following observations can you make? (there can be more than 1) Firms in Mexico have a hard time expanding due to constraints on the labor market Private firms are at an advantage in Mexico as they face lower capital costs than those owned by the state Resources are likely misallocated because capital is not flowing from firms with low MRPK to firms with high MRPK Your firm may find it more costly to borrow than its state-owned competitors
