NOUN TMA Questions and Answers: ECO718 - Macro-Economic Theory I

Q1 Financial theory of investment argues that profits depend ____________on national income and____________ on capital

Positively and negativ ely

Q2 How many propositions did duesenberry used as the basis of the theory?

3

Q3 The financial theory of investment integrates profits theory and acceleration theory and emphasizes that the_________ is the main determinant of investment

Disaggregated cash plan

Q4 According to the profit theory of investment where profits vary directly with income for any level of profits, the higher the interest rate, the_____________will be the_____________and vice versa.

Smaller and optimal capital stock

Q5 When retained earnings are of great importance to small and large firms

When capital market is perfect

Q6 Undistributed profits are regarded as source of internal funds for financing investment, the theory of profit posts that if total income and total profit are high 􀳦?􀳦􀳦?􀳦􀳦?􀳦􀳦?􀳦􀳦?􀳦.of firm also􀳦?􀳦􀳦?

Distributed pro fit and high

Q7 The flexible accelerator theory imtroduces ---------------in the adjustment process

Lags

Q8 The accelerator principle states that an increase in the rate of output of a firm will require a􀳦?􀳦􀳦? 􀳦􀳦?􀳦􀳦?􀳦in its capital state

Proportionate increase

Q9 The MEI schedule which has a negative slow indicating the amount of investment demanded of various rate of interest is called􀳦?􀳦􀳦?􀳦􀳦?􀳦􀳦?􀳦􀳦?􀳦􀳦?􀳦􀳦?􀳦..

Investment demand schedule or curv e

Q10 The marginal efficiency of capital (MEC) is the 􀳦?􀳦􀳦?􀳦􀳦?􀳦􀳦?􀳦.from an additional unit of capital asset over it cost

Expected rate

Q11 Investment will be made in new capital only when the 􀳦?􀳦􀳦?􀳦􀳦?􀳦􀳦?􀳦􀳦?􀳦􀳦?􀳦..is higher than interest rate

Expected rate of return

Q12 What two major factors determine planned investment

Anticipated rate of return and real interest rate

Q13 Autonomous investment is argued to be income in elastic and therefore􀳦?􀳦􀳦?􀳦􀳦?􀳦􀳦?􀳦􀳦? 􀳦􀳦?􀳦􀳦?􀳦.income

Independent

Q14 The marginal propensity to invest is the ratio of change in income denoted mathematically as􀳦?

􀳦??I/􀳦??Y

Q15 Real investment may be induced investment when it is 􀳦?􀳦􀳦?􀳦􀳦?􀳦􀳦?􀳦􀳦?􀳦􀳦?􀳦􀳦?􀳦.or􀳦? 􀳦􀳦?􀳦􀳦?􀳦􀳦?􀳦􀳦?􀳦􀳦?􀳦..motivated

Profit or incom e

Q16 Keynes who did not automatically tend towards full employment believed that the resulting under employment could be curved by _____ or ______prices.

Fixed or monetary

Q17 Posthechnological change is a force that can shift MEI to􀳦?􀳦􀳦?􀳦􀳦?􀳦􀳦?􀳦􀳦?􀳦􀳦?􀳦􀳦?􀳦􀳦? 􀳦􀳦?􀳦.

Right onl y

Q18 Investment is the production or acquisition of real capital assets during any period and is inversely related to interest rate and low interest will lead to high investment, vice versa known as___

Marginal efficiency of investment (M EI)

Q19 Capital is regarded as any previously produced input that can be used in
the__________to__________other goods

Production; produce

Q20 What is financial investment and real investment?

Addition to capital equipment and buying of shares