NATIONAL UNIVERSITY OF SINGAPORE

Department of Economics
EC3102 Macroeconomic Analysis II
Instructor: Ho Kong Weng
Tutorial 5
Question 1
What is Tobins q, and what does it have to do with investment?
Question 2
Use the neoclassical model of investment to explain the impact of the following on the
rental price of capital, the cost of capital, and investment.
(a) Anti-inflationary monetary policy raises the real interest rate.
(b) An earthquake destroys part of the capital stock.
(c) Immigration of foreign workers increases the size of the labor force.
Question 3
Suppose this year is an election year and the economy is in a recession. The opposition
candidate proposes an investment tax credit, which would be effective next year after he
or she takes office. Will there be an impact of the promise on economic conditions in the
current year?
Question 4
Singapore is expecting a larger population of 6.9 million by 2030. Use the model of
residential investment to predict the impact of this forthcoming reality on housing
prices and residential investment.
Comment on the effectiveness of the recent cooling measures on the property market
in Singapore.