Question 1

Increased saving today means

Accepted Answer

Increased saving today means less consumption today but more in the future, as the saved amount can be invested and generate returns over time, leading to more consumption in the future.

Question 2

The benefit of the production of capital is

Accepted Answer

The production of capital goods leads to an increase in future production of consumption goods, as the economy becomes more efficient and productive with the use of additional capital.

Question 3

Because present consumption is more highly valued higher than future consumption, interest is paid.

Accepted Answer

Interest is paid because people prefer present consumption over future consumption, and therefore, are willing to pay a premium (interest) to have access to money now, rather than later. This is known as time preference.

Question 4

Saving is necessary for production because

Accepted Answer

Production takes time, and during that time, resources must be allocated to sustain the production process. Saving allows for those resources to be available during the entire production process, ultimately resulting in more goods and services being produced.

Question 5

The production of capital goods, which are then used to produce consumer goods, is called

Accepted Answer

The process of using capital goods to produce consumer goods is known as roundabout production.

Question 6

Most companies that sell CDs by mail deliver in 1 to 2 weeks.Mosey Music, Inc., takes 4 weeks to deliver CDs.We should expect that Mosey Music

Accepted Answer

Mosey Music will likely need to charge less to remain competitive, as their slower delivery time is a disadvantage compared to other companies that deliver faster.

Question 7

Saving is

Accepted Answer

Saving is required for production as it provides the necessary resources for investment in capital goods and the expansion of business. Without saving, there would be no investment, and hence production would not be possible.

Question 8

Which of the following is an example of roundabout production?

Accepted Answer

Roundabout production involves using indirect methods or intermediate steps to increase efficiency or productivity. Installing a new phone system to improve operations is an example of this.

Question 9

Which of the following is an example of roundabout production?

Accepted Answer

Robinson Crusoe's creation of a fish net is an example of roundabout production because he is using resources to invest in a capital good (the fish net) that will increase his productivity and output in the long run. The other options involve more direct or immediate exchanges of goods and services.

Question 10

For the typical consumer, present consumption is

Accepted Answer

Consumers generally prefer present consumption over future consumption due to the time preference for immediate gratification and the uncertainty of future needs and circumstances.

Question 11

If a person produces capital goods, she sacrifices current production of consumer goods in order to obtain the capability of producing more goods and services in the future.This is called roundabout production.

Accepted Answer

Roundabout production involves sacrificing current production of consumer goods in order to invest in capital goods, which provide the capability of producing more goods and services in the future.

Question 12

The production of capital is a form of roundabout production.

Accepted Answer

The production of capital involves using resources and producing goods that will ultimately help in the production of other goods in the future, which is a characteristic of a roundabout production process.

Question 13

The opportunity cost of producing capital is

Accepted Answer

The opportunity cost of producing capital is the decreased current production of consumption goods because resources are diverted from producing goods for immediate consumption to producing capital goods, which are used for future production.

Question 14

Goods and activities typically are more highly valued the sooner they can be enjoyed, other things constant,

Accepted Answer

This statement reflects the concept of time preference, which is the idea that people generally prefer to have goods and activities sooner rather than later. This preference is not dependent on interest rates or saving behavior, but rather is a fundamental aspect of human decision making. Positive interest rates may provide additional incentive to consume sooner rather than later, but they are not a necessary condition for this preference to exist.

Question 15

Production cannot occur without

Accepted Answer

Saving is necessary for production as it provides the capital needed to invest in resources, labor, and technology to produce goods and services.

Question 16

Exhibit 13-1  The movement from x to x' in Exhibit 13-1 represents a(n)

Accepted Answer

The answer of Exhibit 13-1  The movement from x...

Question 17

Roundabout production occurs when

Accepted Answer

Roundabout production refers to the process of producing capital goods, which are then used to produce consumer goods, rather than directly producing consumer goods.

Question 18

Another term for an investment good is

Accepted Answer

An investment good is a type of capital good, which refers to items such as machinery, equipment, and buildings that are used in the production process to create goods and services. These goods are not consumed immediately but are used to create other goods and services over time, making them a form of investment. The other choices listed (interest, savings, rent, and production) do not accurately describe investment goods.

Question 19

If an economy increases the amount of roundabout production today,

Accepted Answer

Roundabout production refers to increasing the production of capital goods, which are used to produce consumer goods. Increasing roundabout production today means that more resources are allocated towards producing capital goods, which leads to greater capital accumulation in the future. This can result in increased productivity and higher levels of economic growth in the future.

Question 20

The rate of time preference is positive

Accepted Answer

The rate of time preference refers to the idea that people generally prefer to have goods or services now instead of waiting to get them later. This means that they place a higher value on present consumption than future consumption, which results in a positive rate of time preference. It is not directly related to interest rates or savings behavior, although these things may affect it indirectly. Therefore, choice E is the best answer.

Quiz 13: Capital, Interest, and Corporate Finance

Increased saving today means

The benefit of the production of capital is

Because present consumption is more highly valued higher than future consumption, interest is paid.

Saving is necessary for production because

The production of capital goods, which are then used to produce consumer goods, is called

Most companies that sell CDs by mail deliver in 1 to 2 weeks.Mosey Music, Inc., takes 4 weeks to deliver CDs.We should expect that Mosey Music

Saving is

Which of the following is an example of roundabout production?

Which of the following is an example of roundabout production?

For the typical consumer, present consumption is

If a person produces capital goods, she sacrifices current production of consumer goods in order to obtain the capability of producing more goods and services in the future.This is called roundabout production.

The production of capital is a form of roundabout production.

The opportunity cost of producing capital is

Goods and activities typically are more highly valued the sooner they can be enjoyed, other things constant,

Production cannot occur without

Exhibit 13-1 The movement from x to x' in Exhibit 13-1 represents a(n)

Roundabout production occurs when

Another term for an investment good is

If an economy increases the amount of roundabout production today,

The rate of time preference is positive