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During the Great Depression, Tobin's q ____.
A) rose dramatically, as did real interest rates
B) fell to unprecedentedly low levels
C) stayed fairly constant, in contrast to most other economic measures
D) rose only slightly, in spite of Hoover's attempts to prop it up
Answer: B
Diff: 2 Type: MC Page Ref: 644
Skill: Applied
Objective List: 27.1 Outline the transmission mechanisms of monetary policy
According to Tobin's q theory, ____ policy can affect ____ spending through its
effect on the prices of common stock.
A) fiscal; consumption
B) fiscal; investment
C) monetary; consumption
D) monetary; investment
Answer: D
Diff: 2 Type: MC Page Ref: 641
Skill: Recall
Objective List: 27.1 Outline the transmission mechanisms of monetary policy
According to Tobin's q theory, if q is ____, new plant and equipment capital is
____ relative to the market value of business firms, so companies can buy a lot of new
investment goods with only a ____ issue of stock.
A) high; expensive; large
B) high; cheap; large
C) high; cheap; small
D) low; cheap; large
E) low; cheap; small
Answer: C
Diff: 2 Type: MC Page Ref: 641
Skill: Recall
Objective List: 27.1 Outline the transmission mechanisms of monetary policy
According to Tobin's q theory, when equity prices are low the market price of existing
capital is ____ relative to new capital, so expenditure on fixed investment is ____.
A) cheap; low
B) expensive ; low
C) cheap; high
D) expensive; high
Answer: A
Diff: 2 Type: MC Page Ref: 641
Skill: Recall
Objective List: 27.1 Outline the transmission mechanisms of monetary policy