Suppose That the Desired Capital Stock Is Always Equal to Three

question 18

Multiple Choice

Suppose that the desired capital stock is always equal to three times total output for any year. In that case, the accelerator principle implies that investment should always

• A) equal some constant multiple greater than 3 times the annual change in GDP to accommodate depreciation.
• B) be precisely equal to three times the annual change in GDP regardless of the rate of depreciation.
• C) equal some constant multiple less than three times the annual change in GDP to accommodate depreciation.
• D) be proportional to the annual change in GDP, but the information provided is insufficient to compute the multiple exactly.
• E) none of the above.

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Definitions:

Adjusted Coefficient

A modified version of a coefficient in statistical models, adjusted for the influence of other variables.

Statistical Packages

Software programs specifically designed for performing statistical analysis, manipulating, and visualizing data.

Degrees of Freedom

The number of values in a final calculation of a statistic that are free to vary.

Regression Model

A statistical technique used to predict the value of a dependent variable based on the values of one or more independent variables.