Question 1

Which of the following causes a movement along the investment demand?

Accepted Answer

A)  A change in producers' expectations about profitability 
B)  A change in the interest rate 
C)  A change in the general price level 
D)  A stock market crash that reduces household wealth 
A)  A change in producers' expectations about profitability 
B)  A change in the interest rate 
C)  A change in the general price level 
D)  A stock market crash that reduces household wealth

Question 2

Which of the following items is part of gross private domestic investment?

Accepted Answer

A)  Non-residential structures such a new shopping mall 
B)  Furniture purchased by a young couple for their new home 
C)  Purchase of a used automobile 
D)  Purchase of Oracle's stock 
A)  Non-residential structures such a new shopping mall 
B)  Furniture purchased by a young couple for their new home 
C)  Purchase of a used automobile 
D)  Purchase of Oracle's stock

Question 3

In 2004, Congress, supported by the Bush administration, passed a law called the American Jobs Creation Act that gave businesses a one-year special tax break on any profits accumulating overseas that were transferred to the United States. What was the intent of this law?

Accepted Answer

A)  To raise revenue for the government to fund its massive defense spending and to create jobs in the defense industry 
B)  To discourage U.S. firms from investing in foreign countries 
C)  To create jobs and spur investment in the U.S. 
D)  To free up much needed funding for domestic firms in the face of an impending financial crisis 
A)  To raise revenue for the government to fund its massive defense spending and to create jobs in the defense industry 
B)  To discourage U.S. firms from investing in foreign countries 
C)  To create jobs and spur investment in the U.S. 
D)  To free up much needed funding for domestic firms in the face of an impending financial crisis

Question 4

Which of the following is a reason why a greater capital stock can reduce investment?

Accepted Answer

A)  A greater capital stock is likely to lead to less investment because further increases in the demand for investment tend to raise the cost of capital. 
B)  Since businesses undertake investment to adjust their stock of capital to its desired level, the amount of investment needed to reach the desired level will be lower when the current capital stock is higher. 
C)  A greater capital stock is likely to lead to less investment since there will be less old capital to replace. 
D)  The rate of new technological innovations tends to deter investment in new capital because capital becomes obsolete at a faster rate. 
A)  A greater capital stock is likely to lead to less investment because further increases in the demand for investment tend to raise the cost of capital. 
B)  Since businesses undertake investment to adjust their stock of capital to its desired level, the amount of investment needed to reach the desired level will be lower when the current capital stock is higher. 
C)  A greater capital stock is likely to lead to less investment since there will be less old capital to replace. 
D)  The rate of new technological innovations tends to deter investment in new capital because capital becomes obsolete at a faster rate.

Question 5

For investment to occur, saving must also occur.

Accepted Answer

A) True 
 B)False

Question 6

Table 14-1
  
-Refer to Table 14-1. If the market interest rate is 15%, the last project undertaken is

Accepted Answer

A)  Project Finola. 
B)  Project Garron. 
C)  Project Hattrick. 
D)  Project Kenra. 
A)  Project Finola. 
B)  Project Garron. 
C)  Project Hattrick. 
D)  Project Kenra.

Question 7

Which of the following statements is true regarding interest rates and quantity of investment demanded?

Accepted Answer

A)  Higher rates of interest raise the opportunity cost of investment and therefore increase the quantity of investment demanded. 
B)  Higher rates of interest lower the opportunity cost of investment and therefore reduce the quantity of investment demanded. 
C)  Higher rates of interest raise the opportunity cost of investment and therefore reduce the quantity of investment demanded. 
D)  Higher rates of interest lower the opportunity cost of investment and therefore increase the quantity of investment demanded. 
A)  Higher rates of interest raise the opportunity cost of investment and therefore increase the quantity of investment demanded. 
B)  Higher rates of interest lower the opportunity cost of investment and therefore reduce the quantity of investment demanded. 
C)  Higher rates of interest raise the opportunity cost of investment and therefore reduce the quantity of investment demanded. 
D)  Higher rates of interest lower the opportunity cost of investment and therefore increase the quantity of investment demanded.

Question 8

The purchase of a bond is

Accepted Answer

A)  not considered capital. 
B)  equivalent to adding capital to a firm's capital stock. 
C)  equivalent to undertaking investment. 
D)  a more attractive form of investment (compared to capital) when interest rates are high. 
A)  not considered capital. 
B)  equivalent to adding capital to a firm's capital stock. 
C)  equivalent to undertaking investment. 
D)  a more attractive form of investment (compared to capital) when interest rates are high.

Question 9

In the long run, an increase in investment shifts ________because of an increased capacity to produce.

Accepted Answer

A)  The long-run aggregate supply curve 
B)  The long run aggregate demand curve 
C)  The investment demand curve 
D)  The short-run aggregate supply curve but not the long-run aggregate supply curve 
A)  The long-run aggregate supply curve 
B)  The long run aggregate demand curve 
C)  The investment demand curve 
D)  The short-run aggregate supply curve but not the long-run aggregate supply curve

Question 10

Construction of a new home is an example of gross private domestic investment.

Accepted Answer

A) True 
 B)False

Question 11

A decrease in investment demand would most likely be caused by a(n)

Accepted Answer

A)  decrease in the market interest rate. 
B)  decrease in corporate income tax rates. 
C)  increase in the cost of new capital goods. 
D)  increase in the expected demand for output. 
A)  decrease in the market interest rate. 
B)  decrease in corporate income tax rates. 
C)  increase in the cost of new capital goods. 
D)  increase in the expected demand for output.

Question 12

Table 14-1
  
-Refer to Table 14-1. If the market interest rate is 9%, what is the amount of planned investment expenditure?

Accepted Answer

A)  zero 
B)  $1,500 
C)  $4,000 
D)  $5,500 
A)  zero 
B)  $1,500 
C)  $4,000 
D)  $5,500

Question 13

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

Accepted Answer

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 
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

Question 14

Figure 14-1  
-Refer to Figure 14-1. An increase in investment is illustrated by moving from

Accepted Answer

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. 
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.

Question 15

Which of the following will shift a firm's investment demand curve to the left?

Accepted Answer

A)  There is an excess demand in the market for skilled labor. 
B)  The tax code is revised to allow firms to accelerate depreciation on their capital assets. 
C)  The firm experiences a decrease in the capacity utilization rate of capital. 
D)  Its current capital stock is way below its desired level. 
A)  There is an excess demand in the market for skilled labor. 
B)  The tax code is revised to allow firms to accelerate depreciation on their capital assets. 
C)  The firm experiences a decrease in the capacity utilization rate of capital. 
D)  Its current capital stock is way below its desired level.

Question 16

Over the past two decades (1990-2011), the bulk of gross private domestic investment has gone toward

Accepted Answer

A)  the purchase of new homes. 
B)  building new residential structures. 
C)  the replacement of capital that has depreciated. 
D)  research and development. 
A)  the purchase of new homes. 
B)  building new residential structures. 
C)  the replacement of capital that has depreciated. 
D)  research and development.

Question 17

Suppose real estate analysts expect that 100,000 homes will be needed in a particular community by 2014. If the current number of homes in the community is only 50,000, we can expect to see a significant increase in the demand for investment.

Accepted Answer

A) True 
 B)False

Question 18

The local Subaru dealership has an increase in inventory of 17 cars in 2012. In 2013 it sells all 17 cars.

Accepted Answer

A)  The value of the increased inventory will be counted as part of the investment component of GDP in 2012, and the value of the 17 cars sold in 2013 will reduce the investment component in 2013 GDP. 
B)  The value of the 17 unsold cars will be deducted from the investment component of GDP in 2012, and the value of the 17 cars sold in 2013 will increase the consumption component in 2013 GDP. 
C)  The value of the increased inventory will be counted as part of GDP in 2012 and the value of the 17 cars sold in 2013 will cause 2012 GDP to increase. 
D)  The value of the increased inventory will not affect 2012 GDP, but the sale of the cars in 2013 will cause 2013 GDP to increase. 
A)  The value of the increased inventory will be counted as part of the investment component of GDP in 2012, and the value of the 17 cars sold in 2013 will reduce the investment component in 2013 GDP. 
B)  The value of the 17 unsold cars will be deducted from the investment component of GDP in 2012, and the value of the 17 cars sold in 2013 will increase the consumption component in 2013 GDP. 
C)  The value of the increased inventory will be counted as part of GDP in 2012 and the value of the 17 cars sold in 2013 will cause 2012 GDP to increase. 
D)  The value of the increased inventory will not affect 2012 GDP, but the sale of the cars in 2013 will cause 2013 GDP to increase.

Question 19

We would expect that nations that devote a larger share of GDP to gross private domestic investment

Accepted Answer

A)  to be highly industrialized nations. 
B)  to have a higher savings rate. 
C)  to have higher growth rate in potential real GDP. 
D)  to have less volatile fluctuations in economic activity. 
A)  to be highly industrialized nations. 
B)  to have a higher savings rate. 
C)  to have higher growth rate in potential real GDP. 
D)  to have less volatile fluctuations in economic activity.

Question 20

In the United States, during World War II, massive defense spending

Accepted Answer

A)  resulted in huge increases in gross private domestic investment. 
B)  resulted in huge cutbacks in gross private domestic investment. 
C)  added significantly to the nation's capital stock. 
D)  diverted resources from consumption to gross private domestic investment. 
A)  resulted in huge increases in gross private domestic investment. 
B)  resulted in huge cutbacks in gross private domestic investment. 
C)  added significantly to the nation's capital stock. 
D)  diverted resources from consumption to gross private domestic investment.

Which of the following causes a movement along the investment demand?

Which of the following items is part of gross private domestic investment?

In 2004, Congress, supported by the Bush administration, passed a law called the American Jobs Creation Act that gave businesses a one-year special tax break on any profits accumulating overseas that were transferred to the United States. What was the intent of this law?

Which of the following is a reason why a greater capital stock can reduce investment?

For investment to occur, saving must also occur.

Table 14-1 -Refer to Table 14-1. If the market interest rate is 15%, the last project undertaken is

Which of the following statements is true regarding interest rates and quantity of investment demanded?

The purchase of a bond is

In the long run, an increase in investment shifts ________because of an increased capacity to produce.

Construction of a new home is an example of gross private domestic investment.

A decrease in investment demand would most likely be caused by a(n)

Table 14-1 -Refer to Table 14-1. If the market interest rate is 9%, what is the amount of planned investment expenditure?

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

Figure 14-1 -Refer to Figure 14-1. An increase in investment is illustrated by moving from

Which of the following will shift a firm's investment demand curve to the left?

Over the past two decades (1990-2011), the bulk of gross private domestic investment has gone toward

Suppose real estate analysts expect that 100,000 homes will be needed in a particular community by 2014. If the current number of homes in the community is only 50,000, we can expect to see a significant increase in the demand for investment.

The local Subaru dealership has an increase in inventory of 17 cars in 2012. In 2013 it sells all 17 cars.

We would expect that nations that devote a larger share of GDP to gross private domestic investment

In the United States, during World War II, massive defense spending

Economics: the Study of Choice

Demand and Supply

Applications of Demand and Supply

Macroeconomics: the Big Picture

Measuring Total Output and Income

Aggregate Demand and Aggregate Supply

Economic Growth

The Nature and Creation of Money

Financial Markets and the Economy

Monetary Policy and the Fed

Government and Fiscal Policy

Consumption and the Aggregate Expenditures Model

Net Exports and International Finance

Inflation and Unemployment

A Brief History of Macroeconomic Thought and Policy

Inequality, Poverty, and Discrimination

Economic Development

Socialist Economies in Transition

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Exam 14: Investment and Economic Activity

Which of the following causes a movement along the investment demand?

Which of the following items is part of gross private domestic investment?

In 2004, Congress, supported by the Bush administration, passed a law called the American Jobs Creation Act that gave businesses a one-year special tax break on any profits accumulating overseas that were transferred to the United States. What was the intent of this law?

Which of the following is a reason why a greater capital stock can reduce investment?

For investment to occur, saving must also occur.

Table 14-1 -Refer to Table 14-1. If the market interest rate is 15%, the last project undertaken is

Which of the following statements is true regarding interest rates and quantity of investment demanded?

The purchase of a bond is

In the long run, an increase in investment shifts ________because of an increased capacity to produce.

Construction of a new home is an example of gross private domestic investment.

A decrease in investment demand would most likely be caused by a(n)

Table 14-1 -Refer to Table 14-1. If the market interest rate is 9%, what is the amount of planned investment expenditure?

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

Figure 14-1 -Refer to Figure 14-1. An increase in investment is illustrated by moving from

Which of the following will shift a firm's investment demand curve to the left?

Over the past two decades (1990-2011), the bulk of gross private domestic investment has gone toward

Suppose real estate analysts expect that 100,000 homes will be needed in a particular community by 2014. If the current number of homes in the community is only 50,000, we can expect to see a significant increase in the demand for investment.

The local Subaru dealership has an increase in inventory of 17 cars in 2012. In 2013 it sells all 17 cars.

We would expect that nations that devote a larger share of GDP to gross private domestic investment

In the United States, during World War II, massive defense spending

Economics: the Study of Choice

Demand and Supply

Applications of Demand and Supply

Macroeconomics: the Big Picture

Measuring Total Output and Income

Aggregate Demand and Aggregate Supply

Economic Growth

The Nature and Creation of Money

Financial Markets and the Economy

Monetary Policy and the Fed

Government and Fiscal Policy

Consumption and the Aggregate Expenditures Model

Net Exports and International Finance

Inflation and Unemployment

A Brief History of Macroeconomic Thought and Policy

Inequality, Poverty, and Discrimination

Economic Development

Socialist Economies in Transition

Filters