Question 1

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

Accepted Answer

A)  point m. 
B)  point n. 
C)  point p. 
D)  point q. 
A)  point m. 
B)  point n. 
C)  point p. 
D)  point q.

Question 2

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

Accepted Answer

A)  An expectation that there will be an upsurge in the level of economic activity 
B)  An increase in the capital gains tax rate 
C)  An increase in the market interest rate 
D)  The government institutes investment tax credits for business undertaking investments 
A)  An expectation that there will be an upsurge in the level of economic activity 
B)  An increase in the capital gains tax rate 
C)  An increase in the market interest rate 
D)  The government institutes investment tax credits for business undertaking investments

Question 3

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

Accepted Answer

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

Question 4

Figure 14-2  
-Refer to Figure 14-2. Which panel shows the result of higher interest rates?

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 5

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

Accepted Answer

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. 
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.

Question 6

Higher interest rates encourage investment.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is considered investment?

Accepted Answer

A)  The individual who is innovative, takes risks, raises capital and organizes production 
B)  The hiring of a college graduate to work in a firm's "Investment" division 
C)  $200 million of financial capital owned by Bethlehem Steel 
D)  A brand new robot purchased for use on an automobile assembly line 
A)  The individual who is innovative, takes risks, raises capital and organizes production 
B)  The hiring of a college graduate to work in a firm's "Investment" division 
C)  $200 million of financial capital owned by Bethlehem Steel 
D)  A brand new robot purchased for use on an automobile assembly line

Question 8

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

Accepted Answer

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 
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

Question 9

Net private investment equals

Accepted Answer

A)  gross private domestic investment plus depreciation. 
B)  gross private domestic investment minus business taxes. 
C)  gross private domestic investment minus depreciation. 
D)  gross private domestic investment minus inventories. 
A)  gross private domestic investment plus depreciation. 
B)  gross private domestic investment minus business taxes. 
C)  gross private domestic investment minus depreciation. 
D)  gross private domestic investment minus inventories.

Question 10

Figure 14-3
Panel (a) Panel (b)    
-Refer to Figure 14-3. 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),

Accepted Answer

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. 
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.

Question 11

Figure 14-2  
-Refer to Figure 14-2. Which panel represents a sharp decrease in taxes on profits earned by firms?

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 12

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

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 13

Investment represents a choice to consume less now.

Accepted Answer

A) True 
 B)False

Question 14

During the Great Depression, capital stock in the United States was reduced since

Accepted Answer

A)  gross investment was negative. 
B)  gross investment was above depreciation. 
C)  gross investment was below depreciation. 
D)  gross investment was equal to depreciation. 
A)  gross investment was negative. 
B)  gross investment was above depreciation. 
C)  gross investment was below depreciation. 
D)  gross investment was equal to depreciation.

Question 15

Figure 14-6  
-Refer to Figure 14-6. In Panel (a), it is apparent that if the interest rate falls, all other things unchanged, the

Accepted Answer

A)  demand for money increases. 
B)  demand for money decreases. 
C)  quantity of money demanded increases. 
D)  quantity of money demanded decreases. 
A)  demand for money increases. 
B)  demand for money decreases. 
C)  quantity of money demanded increases. 
D)  quantity of money demanded decreases.

Question 16

Table 14-1
  
-Refer to Table 14-1. If the market interest rate is 17%, what is the quantity of investment demanded?

Accepted Answer

A)  $200 
B)  $800 
C)  $1,000 
D)  $2,000 
A)  $200 
B)  $800 
C)  $1,000 
D)  $2,000

Question 17

In the recession that began in late 2007 in the United States, which of the following was the first main element of GDP that faltered?

Accepted Answer

A)  Consumption spending 
B)  New home construction 
C)  Business spending on new equipment 
D)  Net exports 
A)  Consumption spending 
B)  New home construction 
C)  Business spending on new equipment 
D)  Net exports

Question 18

Which of the following is the largest and fastest growing component of gross private domestic investment in the United States between 1995 and 2011?

Accepted Answer

A)  Change in private inventories 
B)  Residential investment 
C)  Nonresidential equipment and software 
D)  Nonresidential structures 
A)  Change in private inventories 
B)  Residential investment 
C)  Nonresidential equipment and software 
D)  Nonresidential structures

Question 19

Figure 14-6  
-Refer to Figure 14-6. If the money supply is decreased in Panel (a) from MS1 to MS2, then in Panel (b),

Accepted Answer

A)  there is a movement along the investment demand curve from D to C. 
B)  there is a movement along the investment demand curve from C to D. 
C)  the investment demand curve shifts to the right. 
D)  the investment demand curve shifts to the left. 
A)  there is a movement along the investment demand curve from D to C. 
B)  there is a movement along the investment demand curve from C to D. 
C)  the investment demand curve shifts to the right. 
D)  the investment demand curve shifts to the left.

Question 20

An increase in interest rate will cause a(n)

Accepted Answer

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)  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.

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

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

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

Figure 14-2 -Refer to Figure 14-2. Which panel shows the result of higher interest rates?

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

Higher interest rates encourage investment.

Which of the following is considered investment?

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

Net private investment equals

Figure 14-3 Panel (a) Panel (b) -Refer to Figure 14-3. Suppose the interest rate rises from 4.8% to 6% as shown in Panel (a) and the quantity of investment demanded falls from I_a to I_b. As a result of this, in Panel (b),

Figure 14-2 -Refer to Figure 14-2. Which panel represents a sharp decrease in taxes on profits earned by firms?

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

Investment represents a choice to consume less now.

During the Great Depression, capital stock in the United States was reduced since

Figure 14-6 -Refer to Figure 14-6. In Panel (a), it is apparent that if the interest rate falls, all other things unchanged, the

Table 14-1 -Refer to Table 14-1. If the market interest rate is 17%, what is the quantity of investment demanded?

In the recession that began in late 2007 in the United States, which of the following was the first main element of GDP that faltered?

Which of the following is the largest and fastest growing component of gross private domestic investment in the United States between 1995 and 2011?

Figure 14-6 -Refer to Figure 14-6. If the money supply is decreased in Panel (a) from MS₁ to MS₂, then in Panel (b),

An increase in interest rate will cause a(n)

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

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

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

Figure 14-2 -Refer to Figure 14-2. Which panel shows the result of higher interest rates?

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

Higher interest rates encourage investment.

Which of the following is considered investment?

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

Net private investment equals

Figure 14-3 Panel (a) Panel (b) -Refer to Figure 14-3. 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),

Figure 14-2 -Refer to Figure 14-2. Which panel represents a sharp decrease in taxes on profits earned by firms?

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

Investment represents a choice to consume less now.

During the Great Depression, capital stock in the United States was reduced since

Figure 14-6 -Refer to Figure 14-6. In Panel (a), it is apparent that if the interest rate falls, all other things unchanged, the

Table 14-1 -Refer to Table 14-1. If the market interest rate is 17%, what is the quantity of investment demanded?

In the recession that began in late 2007 in the United States, which of the following was the first main element of GDP that faltered?

Which of the following is the largest and fastest growing component of gross private domestic investment in the United States between 1995 and 2011?

Figure 14-6 -Refer to Figure 14-6. If the money supply is decreased in Panel (a) from MS1 to MS2, then in Panel (b),

An increase in interest rate will cause a(n)

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

Figure 14-3 Panel (a) Panel (b) -Refer to Figure 14-3. Suppose the interest rate rises from 4.8% to 6% as shown in Panel (a) and the quantity of investment demanded falls from I_a to I_b. As a result of this, in Panel (b),

Figure 14-6 -Refer to Figure 14-6. If the money supply is decreased in Panel (a) from MS₁ to MS₂, then in Panel (b),