Question 1

Figure 14-2  
-Refer to Figure 14-2. Which panel shows the result of a decrease in the cost of capital goods?

Accepted Answer

A)  Panel (a) 
B)  Panel (b) 
C)  Panel (c), a movement from B to A 
D)  Panel (c), a movement from A to B 
A)  Panel (a) 
B)  Panel (b) 
C)  Panel (c), a movement from B to A 
D)  Panel (c), a movement from A to B

Question 2

Which of the following is a component of investment?

Accepted Answer

A)  A travel agency purchases new software to update its reservations process. 
B)  Karla buys an existing home in Oakland, California. 
C)  Sharon, a college student, purchases "MathType," a mathematical equation editing software. 
D)  Wen Kew buys a used delivery truck for his furniture business. 
A)  A travel agency purchases new software to update its reservations process. 
B)  Karla buys an existing home in Oakland, California. 
C)  Sharon, a college student, purchases "MathType," a mathematical equation editing software. 
D)  Wen Kew buys a used delivery truck for his furniture business.

Question 3

The purchase of a bond is an addition to the capital stock.

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

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 
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

Question 5

Figure 14-5  
-Refer to Figure 14-5. The economy is in short-run equilibrium. To move the economy to a long-run equilibrium, policy makers should

Accepted Answer

A)  increase interest rates and encourage investment to close the inflationary gap. 
B)  reduce interest rates and discourage investment to close the recessionary gap. 
C)  increase interest rates and discourage investment to close the inflationary gap. 
D)  reduce interest rates and encourage investment to close the recessionary gap. 
A)  increase interest rates and encourage investment to close the inflationary gap. 
B)  reduce interest rates and discourage investment to close the recessionary gap. 
C)  increase interest rates and discourage investment to close the inflationary gap. 
D)  reduce interest rates and encourage investment to close the recessionary gap.

Question 6

Table 14-1
  
-Refer to Table 14-1. If the market interest rate is 13%, what is the quantity of investment demanded?

Accepted Answer

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

Question 7

Explain the difference between a shift of the investment demand curve and a movement along the investment demand curve. Give one example of what causes a movement along the investment demand curve and one example of what shifts the curve itself.

Accepted Answer

A shift of the investment demand curve o

Question 8

Figure 14-1  
-Refer to Figure 14-1. Given that the economy is on curve B, it is most likely to achieve curve C or beyond if it allocates resources to produce at

Accepted Answer

A)  point r. 
B)  point s. 
C)  point t. 
D)  point u. 
A)  point r. 
B)  point s. 
C)  point t. 
D)  point u.

Question 9

Which of the following is not included under gross private domestic investment?

Accepted Answer

A)  Construction of a new office building 
B)  Purchase of a new computer by an accounting firm 
C)  Scientific research undertaken by a biomedical engineering firm 
D)  Construction of a new private suburban home 
A)  Construction of a new office building 
B)  Purchase of a new computer by an accounting firm 
C)  Scientific research undertaken by a biomedical engineering firm 
D)  Construction of a new private suburban home

Question 10

Which of the following statements is true?

Accepted Answer

A)  Investment subtracts from the natural resource base and depreciation adds to it. 
B)  Investment adds to the natural resource base and depreciation reduces it. 
C)  Investment and depreciation add to the capital stock. 
D)  Investment adds to capital stock and depreciation reduces it. 
A)  Investment subtracts from the natural resource base and depreciation adds to it. 
B)  Investment adds to the natural resource base and depreciation reduces it. 
C)  Investment and depreciation add to the capital stock. 
D)  Investment adds to capital stock and depreciation reduces it.

Question 11

Which of the following is classified as investment? 
I. existing homes
II. business spending on new equipment
III. purchase of corporate stock
IV. taking out a loan to build an office building

Accepted Answer

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

Question 12

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

Accepted Answer

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 
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

Question 13

A decrease in the interest rate will

Accepted Answer

A)  affect the amount of investment undertaken by businesses. 
B)  decrease the amount of investment undertaken by businesses. 
C)  shift the investment demand curve to the right. 
D)  shift the investment demand curve to the left. 
A)  affect the amount of investment undertaken by businesses. 
B)  decrease the amount of investment undertaken by businesses. 
C)  shift the investment demand curve to the right. 
D)  shift the investment demand curve to the left.

Question 14

Expectations of an improving economy will generally cause an increase in investment by shifting the investment demand curve to the right.

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

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 
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

Question 16

Table 14-2
  
-Refer to Table 14-2. If the interest rate rises from 10% to 15%, what is the change in the amount of investment?

Accepted Answer

A)  More than $40 billion 
B)  $40 billion 
C)  $35 billion 
D)  $5 billion 
A)  More than $40 billion 
B)  $40 billion 
C)  $35 billion 
D)  $5 billion

Question 17

A decrease in the level of economic activity will generally

Accepted Answer

A)  not change the investment demand curve. 
B)  shift the investment demand curve to the left. 
C)  cause a movement up and down the investment demand curve. 
D)  shift the investment demand curve to the right. 
A)  not change the investment demand curve. 
B)  shift the investment demand curve to the left. 
C)  cause a movement up and down the investment demand curve. 
D)  shift the investment demand curve to the right.

Question 18

A reallocation of resources to consumption goods from capital goods is investment that shifts the production possibilities curve outward.

Accepted Answer

A) True 
 B)False

Question 19

Higher interest rates increase the opportunity cost of using funds for investment.

Accepted Answer

A) True 
 B)False

Question 20

Suppose a bookstore has 500 copies of a new, unsold Economics textbook. This

Accepted Answer

A)  is treated as an increase in the bookstore's inventories and will decrease the store's gross private domestic investment. 
B)  is treated as an increase in the bookstore's inventories and will increase the store's gross private domestic investment. 
C)  is treated as an increase in the "intermediate goods" category of gross private domestic investment. 
D)  will not affect gross private domestic investment or consumption until the books are sold. 
A)  is treated as an increase in the bookstore's inventories and will decrease the store's gross private domestic investment. 
B)  is treated as an increase in the bookstore's inventories and will increase the store's gross private domestic investment. 
C)  is treated as an increase in the "intermediate goods" category of gross private domestic investment. 
D)  will not affect gross private domestic investment or consumption until the books are sold.

Figure 14-2 -Refer to Figure 14-2. Which panel shows the result of a decrease in the cost of capital goods?

Which of the following is a component of investment?

The purchase of a bond is an addition to the capital stock.

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

Figure 14-5 -Refer to Figure 14-5. The economy is in short-run equilibrium. To move the economy to a long-run equilibrium, policy makers should

Table 14-1 -Refer to Table 14-1. If the market interest rate is 13%, what is the quantity of investment demanded?

Explain the difference between a shift of the investment demand curve and a movement along the investment demand curve. Give one example of what causes a movement along the investment demand curve and one example of what shifts the curve itself.

Figure 14-1 -Refer to Figure 14-1. Given that the economy is on curve B, it is most likely to achieve curve C or beyond if it allocates resources to produce at

Which of the following is not included under gross private domestic investment?

Which of the following statements is true?

Which of the following is classified as investment? I. existing homes II. business spending on new equipment III. purchase of corporate stock IV. taking out a loan to build an office building

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

A decrease in the interest rate will

Expectations of an improving economy will generally cause an increase in investment by shifting the investment demand curve to the right.

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

Table 14-2 -Refer to Table 14-2. If the interest rate rises from 10% to 15%, what is the change in the amount of investment?

A decrease in the level of economic activity will generally

A reallocation of resources to consumption goods from capital goods is investment that shifts the production possibilities curve outward.

Higher interest rates increase the opportunity cost of using funds for investment.

Suppose a bookstore has 500 copies of a new, unsold Economics textbook. This

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

Exam 14: Investment and Economic Activity

Figure 14-2 -Refer to Figure 14-2. Which panel shows the result of a decrease in the cost of capital goods?

Which of the following is a component of investment?

The purchase of a bond is an addition to the capital stock.

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

Figure 14-5 -Refer to Figure 14-5. The economy is in short-run equilibrium. To move the economy to a long-run equilibrium, policy makers should

Table 14-1 -Refer to Table 14-1. If the market interest rate is 13%, what is the quantity of investment demanded?

Explain the difference between a shift of the investment demand curve and a movement along the investment demand curve. Give one example of what causes a movement along the investment demand curve and one example of what shifts the curve itself.

Figure 14-1 -Refer to Figure 14-1. Given that the economy is on curve B, it is most likely to achieve curve C or beyond if it allocates resources to produce at

Which of the following is not included under gross private domestic investment?

Which of the following statements is true?

Which of the following is classified as investment? I. existing homes II. business spending on new equipment III. purchase of corporate stock IV. taking out a loan to build an office building

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

A decrease in the interest rate will

Expectations of an improving economy will generally cause an increase in investment by shifting the investment demand curve to the right.

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

Table 14-2 -Refer to Table 14-2. If the interest rate rises from 10% to 15%, what is the change in the amount of investment?

A decrease in the level of economic activity will generally

A reallocation of resources to consumption goods from capital goods is investment that shifts the production possibilities curve outward.

Higher interest rates increase the opportunity cost of using funds for investment.

Suppose a bookstore has 500 copies of a new, unsold Economics textbook. This

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