The Arbitrage Condition for Capital Demonstrates That

question 80

Multiple Choice

The arbitrage condition for capital demonstrates that:

• A)returns to a bank account are equal to the return to capital.
• B)returns to a bank account are equal to the user cost of capital.
• C)if taxes are zero,profits are maximized.
• D)profit maximizing will yield the optimal amount of capital a firm should buy.
• E)the user cost is less than the marginal product of capital.

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Definitions:

Phillips Curve

An economic theory suggesting an inverse relationship between rates of unemployment and corresponding rates of inflation, indicating trade-offs between these two economic variables.

Rate of Unemployment

The segment of the labor force that is without a job and actively on the look out for employment opportunities.

Passive Approach

A strategy, particularly in investing or management, where minimal intervention or action is taken, often to maintain the current state or to avoid risk.

Recessionary Gap

The difference between the actual output of an economy and its potential output at full employment, indicating underutilization of resources.