Exam 14: Investment and Economic Activity

Suppose your firm is considering an investment project that will generate an expected return of 15%. The project costs $200,000. Suppose further that your firm has $100,000 of retained earnings. If the market interest rate is 10%, your firm should

Figure 14-2 -Refer to Figure 14-2. Which panel represents the result of the selling of bonds in the open market by the Fed?

An increase in the cost of capital goods will generally cause an increase in investment by shifting the investment demand curve to the right.

A decision to produce more investment goods and fewer consumption goods I. requires the sacrifice of current and future consumption. II. allows the production of more of both types of goods in the future. III. requires an increase in current savings.

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

Which of the following statements is true about real gross private domestic investment?

Figure 14-3 Panel (a) Panel (b) -Refer to Figure 14-3. Suppose the interest rate falls from 6% to 4.8%. The quantity of investment demanded rises by (I_a - I_b) as shown in Panel (a). At a given price level, P₁, this causes the aggregate demand curve to shift from C to D as shown in Panel (b). What is the size of this shift?

Which of the following is true in the United States, based on the experience of the past two decades (1990-2011)?

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

In the United States, during part of the Great Depression, between 1931 and 1936

Net investment adds to the nation's capital stock.

Figure 14-2 -Refer to Figure 14-2. Which panel represents the result of repealing a significant investment tax credit?

Figure 14-2 -Refer to Figure 14-2. Which panel represents the result of an increase in the money supply?

Which of the following is a reason why monetary policy can be effectively used to stimulate aggregate demand in the short run?

What does the term "repatriated profits" refer to?

Policies that deter investment such as an increase in the corporate profit tax rate,

Figure 14-5 -Refer to Figure 14-5. The economy is in short-run equilibrium. If policymakers want to use monetary policy to improve economic performance, they should

The investment demand curve shows

Figure 14-5 -Refer to Figure 14-5. To eliminate the output gap, policy makers could conduct

Higher interest rates