第十四章 深圳大学 宏观经济 学 期末考试复习资料

1、chapter 14 solutions to the problems in the textbook:conceptual problems:1.even if the economy has achieved the desired capital stock some (gross) investment still must take place to keep the capital stock at this level. the level of investment has to be sufficient to cover depreciation (due to wear

2、 and tear or because capital becomes obsolete).2.high-tech capital (such as computers) becomes obsolete at a very fast rate and therefore needs to be replaced much earlier if firms want to stay competitive. therefore the rate of depreciation will increase if more is invested in high-tech machines.hu

3、man capital also depreciates since knowledge tends to become outdated (new theories are advanced and new discoveries are made continuously). thus knowledge needs to be updated. who for example, wants to be treated by a physician who hasnt kept up with new advances in medical technology? similarly, s

4、ince one can also think of health as human capital, we can see that, as we grow older, our stock of health tends to depreciate. but the more we invest in health, that is, the healthier we live and the more preventive measures we take, the slower this stock of human capital will depreciate.3.the inte

5、rest rate cannot simply be considered as the rental cost of capital but is also an opportunity cost. retained earnings can be used to invest in new machinery but also to make a loan to someone else. in other words, at any time retained earnings can be financially invested, that is, given to someone

6、in need of funds (the government, for example), in which case these funds would earn interest. for example, if the yield on a government bond or a commercial paper is much higher than the expected rate of return on an investment in real capital, a firm may not want to undertake this investment and i

7、nvest in a government bond. 4.the price of a share of stock in a company should, in an efficient stock market, be equal to the price of a claim on the capital in the company. tobins q is an estimate of the value the stock market places on a firms assets relative to the cost of producing those assets

8、. in other words, it can be thought of as the ratio of the market value of a firm to the replacement cost of capital. the replacement cost of capital is a measure for the marginal cost of capital. if q is greater than 1, then a firm should add physical capital, since for each dollars worth of new ma

9、chinery the firm can sell stock for q 1 dollars. but this means that the marginal product of capital exceeds its marginal costs.5.a sudden increase in the demand for a firms product will increase expectations of future sales and induce a firm to increase its desired capital stock. this will require

10、an increase in net investment. the speed with which the capital stock is increased to its new desired level depends on whether the firm believes that the increase in sales is permanent or temporary and on the cost to the firm of adjusting the capital stock to its new desired level quickly.6.large fi

11、rms have easier access to credit than small firms, since large firms tend to have an established and good credit rating. therefore, small firms are often limited in their investment opportunities by their retained earnings. but if we have many more small firms than large firms, we may observe larger

12、 output fluctuations over the business cycle. this is due to the fact that small firms will invest less in a recession than they otherwise might have because credit is not available to them and profits are down. on the other hand, in a boom these small firms are likely to invest more than they would

13、 otherwise, since profits are high and they want to compensate for the lack of investment during the past downturn.7.a.when profits are high, more internal funds are available for firms. firms generally will use these funds for financing new capital investments, even at times when outside funding is

14、 not easily obtainable. higher profits may come from increased sales. this may make entrepreneurs more optimistic about future sales and encourage them to increase investment spending. higher profits also mean higher dividends and thus higher stock values. but if stock values are high, firms are mor

15、e inclined to raise new funds for additional investment. it should be noted, however, that higher profits and the availability of internal funds should not distract from the fact that the cost of capital still is an important factor in investment decisions. any interest that could be earned on such

16、funds has to be seen as an opportunity cost. 7.b.credit rationing by banks occurs since banks realize that while a cautious entrepreneur may be deterred from investing when interest rates are high, a more reckless entrepreneur may still invest in spite of high rates. entrepreneurs who are more reckl

17、ess are also more likely to fail and default on their loans. therefore in times of tight funds, rationing credit may be a more effective way for banks to ensure profits than increasing the interest rate on loans. credit rationing may also occur for other reasons. for example, the federal reserve can

18、 impose credit limits on financial institutions. 8.a. mortgage interest payments are an important consideration in buying a house. even a small change in mortgage interest rates can significantly affect homebuyers monthly mortgage payments. therefore most people will wait to buy a home until interes

19、t rates are fairly low. the purchase of a home is different from the purchase of a consumption good, since most people can delay purchasing a home for some time if market conditions are unfavorable. if interest rates are very low, many more prospective homebuyers will qualify for a mortgage. on the

20、supply side, housing developers with large financing needs are more likely to undertake new construction if the cost of credit declines. but as the supply of new housing increases, the price for houses may drop, inducing more people to buy.8.b. a state usury law prohibits banks or thrifts from charg

21、ing mortgage rates above a certain maximum. this in effect provides a price ceiling on mortgage rates. but when market interest rates go above this interest rate ceiling, the mortgage market cannot adjust to an equilibrium and there will be excess demand for mortgage funds. at such high interest rat

22、es banks may channel their funds away from mortgages and into other, higher yielding ventures. thus the supply of mortgage credit may decrease. if the inflation rate is high, the real interest rate that homebuyers actually pay may be quite low. therefore homebuyers may demand more mortgage funds, cr

23、eating excess demand for mortgages while there is no opportunity for the market to clear due to the price ceiling. this explains why a low level of housing investment may exist even at low real interest rates.9.the flexible accelerator model tries to explain the speed at which firms adjust their cap

24、ital stock over time. the larger the gap between the desired and actual capital stock is, the higher the level of the firms investment spending on machinery. much, but not all, inventory investment can be explained with the help of this accelerator model. the level of inventory investment is based o

25、n changes in output and therefore sales expectations.10.unanticipated inventory accumulation occurs when the demand for a product is lower than was expected. firms generally respond by decreasing their level of production and a recession may be imminent. however, a planned inventory increase general

26、ly occurs when firms expect an economic upturn and want to be ready for the anticipated increase in the demand for their product.11.the inventory-to-sales ratio did not increase in the 1990-91 recession, probably because of new and better methods of management and firms keeping much tighter control

27、over their inventories. advanced computer technology and the synchronization of shipments of material allow firms to operate with leaner, less costly inventories. therefore the inventory-to-sales ratio is not only less likely to increase due to an undesired inventory increase at the beginning of a r

28、ecession, but it is also less likely to increase due to a desired inventory increase at the beginning of a new boom. it appears that the role of inventory spending in a business cycle may have changed.12.the level of net investment is the addition to the capital stock, that is, in = dk. a low level

29、of net investment implies slow growth in the capital stock and hence future productive capacity. a low rate of capital accumulation generally implies lower future living standards.13. in the long run (when the as-curve is vertical), monetary policy will not affect the real interest rate. however, it

30、 will affect inflation and therefore the nominal interest rate. the nominal interest rate (in) is determined by the real interest rate (ir) plus the inflation rate (p), that is,in = ir + pbut if the nominal interest rate increases, the nominal cost of borrowing funds for investments rises and some b

31、orrowers may no longer qualify for loans because of perceived cash flow problems. banks may actually limit credit when nominal interest rates increase, because they feel that borrowers still interested in loans may be high credit risks. this is particularly true for residential investment, since hou

32、sing is very sensitive to real and nominal interest rates. one reason is that in the u.s. tax system nominal interest payments are tax-deductible, while nominal capital gains due to inflation remain untaxed. a higher rate of inflation may also have a negative impact on stock market values due to inc

33、reased uncertainty about the future. but a decrease in stock values may make it more difficult for firms that want to raise funds for investment projects through issuing new stocks. expectations about inflation also may affect the timing of investments. as a result, the level of investment may be af

34、fected by monetary policy despite the fact that real interest rates have not changed.technical problems:1.the rental cost of capital (rc) is equal to the real interest rate (r) plus the rate of depreciation (d), with the real interest rate defined as the nominal interest rate (i) minus the expected

35、inflation rate (pe): rc = = r + d = i - pe + d. a car rental firm would want to know how fast its cars will depreciate (or what is needed to keep the stock of cars at the original level) and what the costs are of having funds tied up in owning the cars. in order to make a profit, a car rental firm w

36、ould charge more per car than the interest it could get (or has to pay) on the funds tied up plus the depreciation rate times the value of the car. since the rental firm charges a nominal price and is charged a nominal interest rate by a bank for any funds that are borrowed, the charge would be p (i

37、 + d)v, with v = the value of the car. for example, if the current market interest rate is 10%, the rate of depreciation is 20%, and the value of the car is $10,000, then the car rental company would charge at least (0.1 + 0.2)(10,000) = (0.3)(10,000) = 3,000 per year or roughly $8.22 dollars per da

38、y. if we further assume that the car is rented only half of the time, then the costs would go up to $16.44 per day. since the $16.44 charge does not include any other costs to the firm or any profits, we should expect the actual price for a car rental to be higher.2.a.if the net present discounted v

39、alue (npv) of a project is positive, the project is profitable. assuming that year 1 is the present year, the net present value of the project can be calculated in the following way: npv = r1 + r2/(1 + r) + r3/(1 + r)2at an interest rate of r = 5% we get npv = - 200 + 100/(1.05) + 120/(1.1025) = - 2

40、00 + 95.24 + 108.84 = 4.08 0. this means that the project is profitable and should be undertaken.2.b.using the same equation as in 2.a. but with an interest rate of r = 10%, we get npv = - 200 + 100/(1.1) + 120/(1.21) = - 200 + 90.91 + 99.17 = - 9.92 1.but a value of q that is greater than 1 implies

41、 that the value of the marginal product of capital is greater than its marginal cost. therefore the firm should invest.5.b.with a replacement cost of $25 million, q = 1. therefore net investment should be zero. but there should still be some gross investment to replace the capital stock that depreci

42、ates.with a replacement cost of $28 million, q k* = (0.3)(5)/(0.12) = 12.5 = the desired capital stock is valued at $12.5 trillion.6.b. from k* = (0.3)(6)/(0.12) = 15 = the desired capital stock is now valued at $15 trillion.2276.c. from i1 = l(k* - k) = i1 = (0.4)(15 - 12.5) = (0.4)(2.5) = 1 = in t

43、he first year, net investment will be i1 = $1 trillion, and the new capital stock will be k1 = $13.5 trillion. from i2 = (k* - k) = i2 = (0.4)(15 - 13.5) = 0.6 = in the second year, net investment will be i2 =$0.6 trillion and the new capital stock will be k2 = $14.1 trillion. 6.d. as indicated abov

44、e, the answers in 6.c. refer to net investment, that is, an addition to the capital stock. gross investment would include replacement of worn out capital.7.the q-theory of investment predicts that high stock values will induce corporate managers to invest more in real capital. in an efficient stock

45、market, the price of a share of stock in a company should be equal to the price of a claim on the capital in the company. tobins q can be thought of as the ratio of the market value of a firm to the replacement cost of capital, since it is an estimate of the value the stock market places on a firms

46、assets relative to the cost of producing those assets. if the value of q is high, a firm wants to add physical capital and the level of investment rises. but this means that in periods in which stock prices rise rapidly, corporations will increase their investment spending.additional problems:1. exp

47、lain why the stock of existing housing would decline if no more new houses were built.there will always be some depreciation, as existing houses burn or are torn down. if no new houses are built (gross investment is zero), the housing stock will decline (net investment will be negative).2.low interest rates should encourage firms to invest. so why did the u.s. have a low level of investment spending during the 1930