The Concepts of Stock and Flow Are Involved in Firms

question 4

Multiple Choice

The concepts of stock and flow are involved in firms' demand for labour and for capital.Which of the following statements is correct?

• A)A firm's demand for both labour and capital is determined by the marginal value each provides to the stock of labour and capital,respectively.
• B)A firm hires a stock of labour services; and purchases a stock of physical capital,which provides a flow of services.
• C)A firm hires a flow of labour services; and purchases a stock of physical capital,which provides a flow of services.
• D)Labour and capital are both stock variables because they are providing service at any given moment in time.
• E)Labour and capital are both flow variables because their values change over time.

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Definitions:

Simple Interest

Interest calculated on the principal amount of a loan or investment, without compounding over time.

Yield

The income return on an investment, typically expressed as an annual percentage rate based on the investment’s cost, its current market value, or its face value.

Promissory Note

A financial instrument that contains a written promise by one party to pay another a definite sum of money either on demand or at a specified future date.

Commercial Paper

A short-term unsecured debt instrument issued by corporations, typically for financing accounts receivable and inventories.