If the Capital Stock Is Fixed and Something Happens to Raise

question 109

Multiple Choice

If the capital stock is fixed and something happens to raise the marginal product of capital (MPK) for any given quantity of capital, then the real rental price of capital will:

• A) remain the same.
• B) rise.
• C) fall.
• D) fall and then rise.

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Definitions:

Statistical Arbitrage

Use of quantitative systems to uncover many perceived misalignments in relative pricing and ensure profit by diversifying across all of these small bets.

Quantitative Techniques

Mathematical and statistical methods used to analyze numerical data, often applied in economics, finance, and operational research to facilitate decision-making.

Nearly Identical Duration

A characteristic of two or more financial instruments whose cash flows match or are very close in terms of their time structure, minimizing interest rate risk.