If the Replacement Cost of Installed Capital Equals $20 Trillion

question 84

Multiple Choice

If the replacement cost of installed capital equals $20 trillion and the market value of installed capital equals $25 trillion, then according to q theory, businesses should:

• A) add to capital stock.
• B) let capital stock shrink.
• C) keep capital stock unchanged.
• D) reduce product prices to increase profits.

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Definitions:

Establish

To set up, found, or create an organization, system, or set of rules.

Dual Federalism

A political arrangement in which power is divided between the federal and state governments in clearly defined terms, with state governments exercising those powers accorded to them without interference from the federal government.

Federal Government

The national government of a federated state, which shares sovereignty with the constituent states or provinces and possesses certain powers delegated to it by a constitution.

State Governments

The governing bodies of individual states within a federal system, responsible for local legislation and administration.