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Which of the following is not a determinant of investment demand?


A) Producers' expectations about the level of economic activity
B) A decline in consumers' confidence in the economic outlook
C) The quantity of capital stock
D) Household wealth

E) A) and B)
F) A) and C)

Correct Answer

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Use the following to answer questions Exhibit: Investment Projects Use the following to answer questions Exhibit: Investment Projects -(Exhibit: Investment Projects) If the market interest rate is 13%, what is the quantity of investment demanded? A) $800 B) $1,000 C) $2,000 D) $4,000 -(Exhibit: Investment Projects) If the market interest rate is 13%, what is the quantity of investment demanded?


A) $800
B) $1,000
C) $2,000
D) $4,000

E) A) and B)
F) A) and C)

Correct Answer

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Use the following to answer questions Exhibit: Investment Demand and Aggregate Demand Figure 14-3 Panel (a) Panel (b) Use the following to answer questions Exhibit: Investment Demand and Aggregate Demand Figure 14-3 Panel (a) Panel (b) -(Exhibit: Investment Demand and Aggregate Demand) Suppose the interest rate rises from 4.8% to 6% as shown in Panel (a) And the quantity of investment demanded falls from I<sub>a</sub> to I<sub>b</sub>.As a result of this, in Panel (b) , A) the aggregate demand curve shifts from AD<sub>1</sub> to AD<sub>2</sub>. B) the aggregate demand curve shifts from AD<sub>2</sub> to AD<sub>1</sub>. C) the aggregate demand curve does not shift; there is a movement up along the prevailing aggregate demand curve. D) the aggregate demand curve does not shift; there is a movement down along the prevailing aggregate demand curve. Use the following to answer questions Exhibit: Investment Demand and Aggregate Demand Figure 14-3 Panel (a) Panel (b) -(Exhibit: Investment Demand and Aggregate Demand) Suppose the interest rate rises from 4.8% to 6% as shown in Panel (a) And the quantity of investment demanded falls from I<sub>a</sub> to I<sub>b</sub>.As a result of this, in Panel (b) , A) the aggregate demand curve shifts from AD<sub>1</sub> to AD<sub>2</sub>. B) the aggregate demand curve shifts from AD<sub>2</sub> to AD<sub>1</sub>. C) the aggregate demand curve does not shift; there is a movement up along the prevailing aggregate demand curve. D) the aggregate demand curve does not shift; there is a movement down along the prevailing aggregate demand curve. -(Exhibit: Investment Demand and Aggregate Demand) Suppose the interest rate rises from 4.8% to 6% as shown in Panel (a) And the quantity of investment demanded falls from Ia to Ib.As a result of this, in Panel (b) ,


A) the aggregate demand curve shifts from AD1 to AD2.
B) the aggregate demand curve shifts from AD2 to AD1.
C) the aggregate demand curve does not shift; there is a movement up along the prevailing aggregate demand curve.
D) the aggregate demand curve does not shift; there is a movement down along the prevailing aggregate demand curve.

E) All of the above
F) B) and D)

Correct Answer

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Higher interest rates will lead to increased investment.

A) True
B) False

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Over time, changes in investment I.shift a nation's production possibilities curve outward. II.shift the long-run aggregate supply curve to the right. III.shift the short-run aggregate supply curve to the right. IV.contribute to economic growth.


A) I and IV only
B) II and IV only
C) I, II, and IV only
D) I, II, III, and IV

E) None of the above
F) A) and C)

Correct Answer

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Which of the following will shift the investment demand curve to the right?


A) The imposition of government regulations that reduce the incentive to produce, for example, more stringent environmental regulation
B) An increase in the rate of new technological innovations.
C) An increase in the cost of new capital goods
D) A decrease in the market interest rate

E) All of the above
F) B) and C)

Correct Answer

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Which of the following will shift the investment demand curve to the left?


A) An expectation of increased profitability
B) An increase in the rate of new technological innovations
C) An increase in the market interest rate
D) The government repeals investment tax credits

E) A) and B)
F) A) and C)

Correct Answer

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An important short-run consequence of a lower interest rate is an increase in aggregate demand.

A) True
B) False

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All other things unchanged, rapid advances in technology and the introduction of new products tends to


A) have no effect on the level of investment.
B) shift the investment demand curve to the left.
C) have no effect on the investment demand curve.
D) shift the investment demand curve to the right.

E) A) and C)
F) B) and C)

Correct Answer

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Which of the following will shift the investment demand curve to the right?


A) An increase in the capital gains tax rate
B) A decrease in the market interest rate
C) An increase in the capacity utilization rate of capital
D) The government repeals investment tax credits

E) B) and C)
F) All of the above

Correct Answer

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Use the following to answer questions Exhibit: The Economy's Investment Demand Schedule Use the following to answer questions Exhibit: The Economy's Investment Demand Schedule -A decrease in the interest rate will cause a(n) A) increase in the investment demand curve. B) decrease in the investment demand curve. C) movement up along the investment demand curve. D) movement down along the investment demand curve. -A decrease in the interest rate will cause a(n)


A) increase in the investment demand curve.
B) decrease in the investment demand curve.
C) movement up along the investment demand curve.
D) movement down along the investment demand curve.

E) B) and C)
F) C) and D)

Correct Answer

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Which of the following will shift the investment demand curve to the right?


A) The imposition of government regulations that reduce the incentive to produce, for example, more stringent environmental regulation
B) A decrease in the capacity utilization rate of capital
C) A decrease in the cost of labor
D) An increase in GDP

E) A) and C)
F) A) and B)

Correct Answer

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D

Use the following to answer questions Exhibit: Money and Investment Use the following to answer questions Exhibit: Money and Investment -Construction of a new home is an example of gross private domestic investment. -Construction of a new home is an example of gross private domestic investment.

A) True
B) False

Correct Answer

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Use the following to answer questions Exhibit: Investment and Production Possibilities Use the following to answer questions Exhibit: Investment and Production Possibilities -(Exhibit: Investment and Production Possibilities) An increase in investment is illustrated by moving from A) point m to point n on curve A. B) point q to point p on curve A. C) point v on curve C to point s on curve B. D) point w on curve C to point r on curve B. -(Exhibit: Investment and Production Possibilities) An increase in investment is illustrated by moving from


A) point m to point n on curve A.
B) point q to point p on curve A.
C) point v on curve C to point s on curve B.
D) point w on curve C to point r on curve B.

E) C) and D)
F) None of the above

Correct Answer

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If the Fed wishes to stimulate aggregate demand, it will conduct an open market


A) sale which will lower bond prices, lower interest rates, and stimulate investment.
B) purchase which will lower bond prices, lower interest rates, and discourage investment.
C) sale which will lower bond prices, raise interest rates, and discourage investment.
D) purchase which will raise bond prices, lower interest rates, and stimulate investment.

E) All of the above
F) A) and C)

Correct Answer

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D

Use the following to answer questions Exhibit: Investment Projects Use the following to answer questions Exhibit: Investment Projects -(Exhibit: Investment Projects) If the market interest rate falls from 15% to 11%, what happens to the quantity of investment demanded? A) It decreases by $2,200 because investment is now less profitable. B) It decreases by $1,000 because investment is now less profitable. C) It increases by $200 because investment is now more profitable. D) It increases by $2,200 because investment is now more profitable. -(Exhibit: Investment Projects) If the market interest rate falls from 15% to 11%, what happens to the quantity of investment demanded?


A) It decreases by $2,200 because investment is now less profitable.
B) It decreases by $1,000 because investment is now less profitable.
C) It increases by $200 because investment is now more profitable.
D) It increases by $2,200 because investment is now more profitable.

E) All of the above
F) B) and C)

Correct Answer

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In the short run, a decrease in the interest rate


A) will shift the aggregate demand curve to the right.
B) will shift the investment demand curve to the right.
C) will shift the long-run aggregate supply curve to the right.
D) will shift the short-run aggregate supply curve to the right.

E) None of the above
F) All of the above

Correct Answer

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Net investment adds to the nation's capital stock.

A) True
B) False

Correct Answer

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Use the following to answer questions Exhibit: Money and Investment Use the following to answer questions Exhibit: Money and Investment -A reallocation of resources to consumption goods from capital goods is investment that shifts the production possibilities curve outward. -A reallocation of resources to consumption goods from capital goods is investment that shifts the production possibilities curve outward.

A) True
B) False

Correct Answer

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Which of the following is not a component of gross private domestic investment spending?


A) An increase in business inventories
B) The extensive renovation of an old factory building
C) A consumer's purchase of a brand new condominium
D) The purchase of stock in the General Electric Company

E) None of the above
F) B) and C)

Correct Answer

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D

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