How Does the Quantity of Capital Already in Use Affect

question 23

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:

Self-serving Bias

The common tendency to attribute positive events to one’s own character but attribute negative events to external factors.

Narcissism

A personality trait characterized by an inflated sense of one's own importance, a deep need for excessive attention and admiration, coupled with a lack of empathy for others.

Self-efficacy

An individual’s belief in their own ability to successfully accomplish tasks and reach goals.

Spotlight Effect

The idea that one's actions and appearance draw more observation from others than truly happens.