Tag: wealth, capital and money

Questions Related to wealth, capital and money

Which of the following are true or false?
a) Capital formation means the increase in the stock of real capital in a country 
b) Saving is not essential for capital formation

economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

  1. Both (a) and (b) are true

  2. (a) is true, but (b) is false

  3. (a) is false, but (b) is true

  4. Both (a) and (b) are false

Show answer
Correct Option: B
Explanation:
1)Capital formation refers to the net capital accumulation during an accounting period for a particular area.Thus 1st statement is true.
2)Savings is essential for capital formation as savings leads to investment in an economy which in turn leads to more capital formation.

What is marginal efficiency of capital ?

economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

  1. Expected rate of return on new investment

  2. Expected rate of return of existing investment

  3. Difference between rate of profit and rate of interest

  4. Value of output per unit of capital invested

Show answer
Correct Option: A
Explanation:

It is calculated in order to make the future prediction and to check the efficiency of the return which the investors will receive when they will invest in that new investment opportunity.It is extremely important in order to draw more shareholders in the financial market.

Capital-output ratio of a commodity measures ________. 

economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

  1. its per unit cost of production

  2. the amount of capital invested per unit of output

  3. the ratio of capital depreciation to quantity of output

  4. the ratio of working capital employed to quantity of output

Show answer
Correct Option: B
Explanation:

Capital-output ratio is measured by calculating the proportion of capital investment needed to produce one unit of output. Capital-output ratio helps to determine the productivity of the economy.

Capital-Output Ratio measures ________.

economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

  1. its per unit cost of production

  2. the amount of capital invested per unit of output

  3. the ratio of capital depreciation to quantity of output

  4. the ratio of working capital employed to quantity of output

Show answer
Correct Option: B
Explanation:

It is the amount of capital needed to produce one unit of output.

It represent the proportionate change in the amount of investment due to a fixed capital investment in an economy in a particular period of time.

In the short run which of the following is fixed?

economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

  1. Labor

  2. Capital

  3. Raw material

  4. None of the above

Show answer
Correct Option: B
Explanation:

In short run period(which generally means period within 1 year)capital remains fixed as capital formation needs high investment and moreover in short run even when the output is zero some fixed cost is incurred by the firm due to capital .

Labour intensive technique would get chosen in a _______.

economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

  1. Labour surplus economy

  2. Capital surplus economy

  3. Developed economy

  4. Developing economy

Show answer
Correct Option: A
Explanation:

The economy has to decide about technique of production on the basis of cost of labour and capital. A labour surplus economy choose labour intensive techniques and a capital surplus economy choose capital - intensive technique.

Find the odd option out.

economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

  1. Capital is man-made

  2. All capital is wealth

  3. Capital is durable

  4. Mobilisation of savings

Show answer
Correct Option: D
Explanation:

Capital is that wealth which is used in the production of goods and services in an economy: capital and human resource have an integrated  relationship:capital has to withstand wear ,pressure, damage etc.MOBILISATION OF SAVINGS is the odd one as it is not a feature of capital

Capital that can be used for several purposes or by several industries is ___________.

economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

  1. working capital

  2. social capital

  3. floating capital

  4. human capital

Show answer
Correct Option: C
Explanation:

Floating capital can be used for many purposes or by several industries. It is a part of capital that is invested in current assets of the organization, like raw materials.

Leather in a shoe factory is _______.

economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

  1. fixed capital

  2. sunk capital

  3. floating capital

  4. circulating capital

Show answer
Correct Option: C
Explanation:

Floating capital refers to the raw material part of the capital also known as working capital which can be used in many ways in the factory. Therefore, leather in a shoe factory is a floating capital.

Machines and tools are included in ________.

economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

  1. circulating capital

  2. fixed capital

  3. floating capital

  4. sunk capital

Show answer
Correct Option: B
Explanation:

Machines and tools are fixed capital  they are fixed assets(assets which are purchased for long term use and are not likely to be converted quickly into cash)