In the country of Lott in 1998, gross investment was $4 billion and depreciation was $1 billion. Capital stock at the beginning of 1998 was $14 billion. During 1998, the capital stock______________ and at the end of 1998, it was _______.

did not change; $14 billion
increased by $3 billion; $17 billion
decreased by $3 billion; $11 billion
increased by $4 billion; $18 billion

The return on capital is _______ if the __________ exceeds the inflation rate.

negative; nominal interest rate
positive; nominal interest rate
zero; real interest rate
negative; real interest rate

An Internet provider is trying to decide whether to use some new technology that costs $30 million. Net revenue for one year of operation is expected to be $35 million. The firm plans to scrap this technology after one year. The expected profit rate is about __________.

86 percent
17 percent
$5 million
14 percent

If the profit rate that a firm expects to make from a new investment is greater than the real interest rate, the __________________________.

investment does not involve an opportunity cost
firm will make the investment
firm will prefer to buy bonds
firm will not make the investment

You observe that the real interest rate rises and investment increases. You know for sure that __________ must have __________ .

the expected profit rate; decreased
the expected profit rate; increased
disposable income; increased
real GDP; increased

___________ is the opportunity cost of consumption, and when the opportunity cost of consumption increases, saving _______.

Saving; increases
The real interest rate; increases
Inflation; increases
Disposable income; decreases

Kevin's disposable income is $24,000 a year. He has no money in the bank, a car, and a car loan of $4,000. Tammy's disposable income is $24,000 a year. She has $10,000 in the bank, a car, and no debts. Kevin and Tammy own no other assets. Other things remaining the same, Kevin will save __________ than Tammy because _____________.

less; he is paying off his car loan
more; the purchasing power of his net assets is less
less; Tammy has a habit of saving
more; he has to pay interest on his loan

The figure shows three saving supply curves for an economy. Initially, the economy is at point a. A decrease in disposable income will move the economy to

point b.
point c.
point e.
point d.

In the closed economy of the planet Octagon, saving is $40 million and the government has a budget surplus of $3 million. Government purchases are $20 million. Investment on planet Octagon is _______.

$23 million
$63 million
$60 million
$43 million

The figure illustrates the investment demand and saving supply for the open economy of Tradeit. When the world real interest rate is 5 percent a year, ______________________.

Tradeit's investment exceeds its saving
Tradeit neither borrows from nor lends to the rest of the world
Tradeit borrows $5 billion from the rest of the world
Tradeit lends $5 billion to the rest of the world

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