Capital theory II

workers of a cooperative are capitalists

The gross market rate of interest is 5%. A company of 1000000 of capital has gross accounting profits of 40000. Result?

an artificially low interest rate induces entrepreneurs to engage in investment projects they will be unable to complete

a loan contract is an exchange of present goods against future goods

the gross market rate of interest is the rate of interest in the credit market minus inflation

What is not a component of the gross market interest rate?

an employment contract is equivalent to a loan

Those who demand present goods (wrong answer)

The time market consists in

the higher the amount of savings, the higher the interest rate c.p.

Exchanges in the time market give rise to the interest rate reflecting the social time preference rate

Those who forgoe the consumption of present goods and supply present goods are called

the lower the supply of present goods, the higher the price of present goods in terms of future goods, (i rate)

a high interest rate indicates that savings, the supply of present goods, is relatively scarce

The psychic intensity with which we prefer present goods to future goods varies (wrong answer)

the interest rate plays a vital role in coordinating the behaviour of consumers, savers and investors

A company cannot have entrepreneurial losses and accounting profits at the same time

Directly observable of the time market are only gross accounting profits

Gross market rate of interest=6%. Expected price inflation=4%,risk premium=1%. How high is the pure rate of interest?

When social time preference increases, ceteris paribus

It is possible to conceive a society without a loan market and an intricate structure of production