Question 1

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.

Question 2

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 3

How does the quantity of capital already in use affect the level of investment?
I. A greater capital stock is likely to lead to more investment since there will be more capital
To replace.
II. A greater capital stock is likely to lead to less investment because further increases in
The demand for investment raise the cost of capital.
III. For a given desired level of capital stock, the amount of investment needed to reach that
Level will be lower when the current capital stock is higher.
IV. Investment means adding new capital; the existing stock of capital does not influence
Additions to capital.

Accepted Answer

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

Question 4

Which of the following will not shift the investment demand curve?

Accepted Answer

A)  An expansionary monetary policy that lowers interest rates 
B)  A decrease in corporate income tax rates 
C)  Businesses become more optimistic about the level of economic activity 
D)  New markets open in Chile and Brazil for U.S. products 
A)  An expansionary monetary policy that lowers interest rates 
B)  A decrease in corporate income tax rates 
C)  Businesses become more optimistic about the level of economic activity 
D)  New markets open in Chile and Brazil for U.S. products

Question 5

Use the following to answer questions .
Exhibit: Investment Demand  
-(Exhibit: Investment Demand) 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 6

What does the term "repatriated profits" refer to?

Accepted Answer

A)  It refers to the transfer of profits earned by firms from their domestic operations to fund their overseas operations. 
B)  It refers to profits accumulated by firms in their overseas operations that are transferred to the United States. 
C)  It refers to profits accumulated by firms in their overseas operations that are not subject to U.S. taxes as long as these profits are used to purchase U.S. government bonds. 
D)  It refers to the transfer of profits earned by firms from their domestic operations to be distributed as dividends to their partners in foreign countries. 
A)  It refers to the transfer of profits earned by firms from their domestic operations to fund their overseas operations. 
B)  It refers to profits accumulated by firms in their overseas operations that are transferred to the United States. 
C)  It refers to profits accumulated by firms in their overseas operations that are not subject to U.S. taxes as long as these profits are used to purchase U.S. government bonds. 
D)  It refers to the transfer of profits earned by firms from their domestic operations to be distributed as dividends to their partners in foreign countries.

Question 7

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 8

Use the following to answer questions .
Exhibit: Investment Projects
  
-(Exhibit: Investment Projects) 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 9

Gross private domestic investment, the official government measure of investment, includes all of the following except

Accepted Answer

A)  education. 
B)  new business structures. 
C)  new residential investment. 
D)  changes in business inventories. 
A)  education. 
B)  new business structures. 
C)  new residential investment. 
D)  changes in business inventories.

Question 10

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 11

Use the following to answer questions .
Exhibit: Investment Projects
  
-(Exhibit: Investment Projects) 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 12

For investment to occur, saving must also occur.

Accepted Answer

A) True 
 B)False

Question 13

Use the following to answer questions .
Exhibit: Investment Demand  
-(Exhibit: Investment Demand) 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 14

Which of the following is true in the United States, based on the experience since 1990?

Accepted Answer

A)  Gross private domestic investment has fallen as a percentage share of GDP. 
B)  Depreciation is greater than gross private domestic investment. 
C)  Depreciation is greater than net private domestic investment. 
D)  Net private domestic investment is greater than gross private domestic investment. 
A)  Gross private domestic investment has fallen as a percentage share of GDP. 
B)  Depreciation is greater than gross private domestic investment. 
C)  Depreciation is greater than net private domestic investment. 
D)  Net private domestic investment is greater than gross private domestic investment.

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A)  loan the retained earnings out at 5%. 
B)  loan the retained earnings out at 10%. 
C)  loan the retained earnings out at 15%. 
D)  invest the $100,000 of retained earnings in the project and borrow the remaining $100,000 at the interest rate of 10%. 
A)  loan the retained earnings out at 5%. 
B)  loan the retained earnings out at 10%. 
C)  loan the retained earnings out at 15%. 
D)  invest the $100,000 of retained earnings in the project and borrow the remaining $100,000 at the interest rate of 10%.

Question 17

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?

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 18

Use the following to answer questions .
Exhibit: Investment Demand  
-(Exhibit: Investment Demand) Which panel shows the result of a reduction in the capital gains tax?

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 19

Use the following to answer questions .
Exhibit: Money and Investment  
-(Exhibit: Money and Investment) 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 20

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

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

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

Which of the following will not shift the investment demand curve?

Use the following to answer questions . Exhibit: Investment Demand -(Exhibit: Investment Demand) Which panel represents the result of the purchase of bonds in the open market by the Fed?

What does the term "repatriated profits" refer to?

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

Use the following to answer questions . Exhibit: Investment Projects -(Exhibit: Investment Projects) If the market interest rate is 17%, what is the quantity of investment demanded?

Gross private domestic investment, the official government measure of investment, includes all of the following except

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

Use the following to answer questions . Exhibit: Investment Projects -(Exhibit: Investment Projects) If the market interest rate is 15%, the last project undertaken is

For investment to occur, saving must also occur.

Use the following to answer questions . Exhibit: Investment Demand -(Exhibit: Investment Demand) Which panel represents a sharp decrease in taxes on profits earned by firms?

Which of the following is true in the United States, based on the experience since 1990?

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

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

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?

Use the following to answer questions . Exhibit: Investment Demand -(Exhibit: Investment Demand) Which panel shows the result of a reduction in the capital gains tax?

Use the following to answer questions . Exhibit: Money and Investment -(Exhibit: Money and Investment) In Panel (a), it is apparent that if the interest rate falls, all other things unchanged, the

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

Economics: the Study of Choice

Demand and Supply

Applications of Supply and Demand

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

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Exam 14: Investment and Economic Activity

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

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

Which of the following will not shift the investment demand curve?

Use the following to answer questions . Exhibit: Investment Demand -(Exhibit: Investment Demand) Which panel represents the result of the purchase of bonds in the open market by the Fed?

What does the term "repatriated profits" refer to?

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

Use the following to answer questions . Exhibit: Investment Projects -(Exhibit: Investment Projects) If the market interest rate is 17%, what is the quantity of investment demanded?

Gross private domestic investment, the official government measure of investment, includes all of the following except

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

Use the following to answer questions . Exhibit: Investment Projects -(Exhibit: Investment Projects) If the market interest rate is 15%, the last project undertaken is

For investment to occur, saving must also occur.

Use the following to answer questions . Exhibit: Investment Demand -(Exhibit: Investment Demand) Which panel represents a sharp decrease in taxes on profits earned by firms?

Which of the following is true in the United States, based on the experience since 1990?

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

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

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?

Use the following to answer questions . Exhibit: Investment Demand -(Exhibit: Investment Demand) Which panel shows the result of a reduction in the capital gains tax?

Use the following to answer questions . Exhibit: Money and Investment -(Exhibit: Money and Investment) In Panel (a), it is apparent that if the interest rate falls, all other things unchanged, the

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

Economics: the Study of Choice

Demand and Supply

Applications of Supply and Demand

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

Filters