If an Earthquake Destroys Some of the Capital Stock, the Neoclassical

question 109

Multiple Choice

If an earthquake destroys some of the capital stock, the neoclassical theory of distribution predicts that:

• A)the real wage will rise, and the real rental price of capital will fall.
• B)both the real wage and the real rental price of capital will fall.
• C)both the real wage and the real rental price of capital will rise.
• D)the real wage will fall, and the real rental price of capital will rise.

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Definitions:

Consecutive Payments

Regular payments made in a series one after another, often referring to loan repayments or lease payments.

Accrued Liability

A liability that has been incurred, often for expenses, that has not yet been paid or recorded at the end of the accounting period.

Working Capital

The difference between a company's current assets and current liabilities, indicating the liquidity of the business.

Current Liabilities

Short-term financial obligations that are due within one year or within the normal operating cycle of a business.