The "Q Theory of Investment," or "Tobin's Q," States That

question 86

Multiple Choice

The "q theory of investment," or "Tobin's q," states that

• A)a rise in the stock market would lead firms to increase their rate of capital investment.
• B)a fall in the stock market would lead firms to increase their rate of capital investment.
• C)a rise in the stock market would lead firms to decrease their rate of capital investment.
• D)there is no relationship between the stock price changes and the capital investment.

---

Definitions:

Economic Growth

The escalation in the real value of goods and services an economy produces, adjusted for inflation, across a timeframe.

Economic Output

The total value of all goods and services produced by an economy over a specific time period.

National Sales Tax

A tax levied on retail sales of goods and services at the national level, typically a percentage of the sales price.

Low-Income

Describes individuals or families that earn significantly less than the median income of their locality, often leading to limited access to goods and services.