How Does the Quantity of Capital Already in Use Affect

question 122

Multiple Choice

How does the quantity of capital already in use affect the level of investment?
I. A greater capital stock is likely to lead to more investment since there will be more capital to replace.
II. A greater capital stock is likely to lead to less investment because further increases in the demand for investment raise the cost of capital.
III. For a given desired level of capital stock, the amount of investment needed to reach that level will be lower when the current capital stock is higher.
IV. Investment means adding new capital; the existing stock of capital does not influence additions to capital.

• A) I and II only
• B) I and III only
• C) I, II, and III only
• D) IV only

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Definitions:

Ethical Standards

Principles that guide behavior in terms of what is considered right and wrong, aiming to ensure fairness, integrity, and respect in various contexts.

Integrity

The quality of being honest and having strong moral principles, considered foundational to trustworthiness and ethical behavior in personal and professional contexts.

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Choices made based on moral principles and values, considering what is right and fair for all involved parties.