James Tobin reasoned that:
A) the stock market is a "random walk."
B) if the stock market values capital at less than its replacement cost, the stock market will go up.
C) if the stock market values capital at less than its replacement cost, the stock market will go down.
D) if the stock market values capital at less than its replacement cost, the firm's managers will not replace capital as it wears out.

Question

Quizplus · Accepted Answer

James Tobin proposed the concept of "Tobin's q," which suggests that if the market value of a firm's assets is less than their replacement cost, firms will be less inclined to invest in new capital.

James Tobin Reasoned That