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1. In the ModiglianiLife-Cycle Theory, if the number of years to retirement increases, life resources will...

1. In the ModiglianiLife-Cycle Theory, if the number of years to retirement increases, life resources will . and current consumption will .

a. increase; decrease

b. increase; increase

c. decrease; increase

d. decrease; decrease.

2. In equilibrium, the real rental price of capital is equal to

(a) the cost of capital
(b) the marginal product of capital
(c) the price of output

(d) the interest rate

3. The marginal cost of capital is determined by all of the following EXCEPT,

(a) corporate profit rate
(b) rate of depreciation
(c) interest rate

(d) price of capital and its rate of change

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Answer #1
1. In the ModiglianiLife-Cycle Theory, if the number of years to retirement increases, life resources will . and current consumption will .

a. increase; decrease

b. increase; increase

c. decrease; increase

d. decrease; decrease.

Answer: Option (b) increase; increase

2. In equilibrium, the real rental price of capital is equal to

(a) the cost of capital
(b) the marginal product of capital
(c) the price of output

(d) the interest rate

Answer: Option (b) the marginal product of capital

3. The marginal cost of capital is determined by all of the following EXCEPT,

(a) corporate profit rate
(b) rate of depreciation
(c) interest rate

(d) price of capital and its rate of change

Answer: Option (c) interest rate

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