Question 1

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 2

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 3

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 4

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

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is true regarding investment?

Accepted Answer

A)  In the short run it increases aggregate supply but in the long run it increases aggregate demand. 
B)  In the short run it influences aggregate demand and in the long run it influences the rate at which the economy grows. 
C)  In the short run it influences aggregate demand but in the long run it retards economic growth since it requires saving. 
D)  In the short run it reduces aggregate demand because it requires savings but in the long it promotes economic growth. 
A)  In the short run it increases aggregate supply but in the long run it increases aggregate demand. 
B)  In the short run it influences aggregate demand and in the long run it influences the rate at which the economy grows. 
C)  In the short run it influences aggregate demand but in the long run it retards economic growth since it requires saving. 
D)  In the short run it reduces aggregate demand because it requires savings but in the long it promotes economic growth.

Question 6

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 7

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

Accepted Answer

A)  Monetary policy stimulates aggregate demand by working through the positive relationship between the price level and the quantity of investment demanded. 
B)  Monetary policy stimulates aggregate demand by working through the negative relationship between the interest rates and the quantity of investment demanded. 
C)  Monetary policy stimulates aggregate demand by working through the positive relationship between the interest rates and the general price level. 
D)  Monetary policy stimulates aggregate demand by working through the positive relationship between the interest rates and the quantity of investment demanded. 
A)  Monetary policy stimulates aggregate demand by working through the positive relationship between the price level and the quantity of investment demanded. 
B)  Monetary policy stimulates aggregate demand by working through the negative relationship between the interest rates and the quantity of investment demanded. 
C)  Monetary policy stimulates aggregate demand by working through the positive relationship between the interest rates and the general price level. 
D)  Monetary policy stimulates aggregate demand by working through the positive relationship between the interest rates and the quantity of investment demanded.

Question 8

The investment demand curve shows

Accepted Answer

A)  the quantity of investment demanded at each interest rate, with all other determinants of investment unchanged. 
B)  the rate of return on investment at each interest rate, with all other determinants of investment unchanged. 
C)  the relationship between investment and saving. 
D)  the relationship between investment and gross domestic product.
Ans A 
A)  the quantity of investment demanded at each interest rate, with all other determinants of investment unchanged. 
B)  the rate of return on investment at each interest rate, with all other determinants of investment unchanged. 
C)  the relationship between investment and saving. 
D)  the relationship between investment and gross domestic product.
Ans A

Question 9

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 10

An investment tax credit is a type of capital gains tax.

Accepted Answer

A) True 
 B)False

Question 11

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 12

In the last 80 years, the United States recorded a negative net private domestic investment during three periods. Which of the following are examples of two such periods?

Accepted Answer

A)  during World War II and during the oil crisis in the late 1970s 
B)  during the Great Depression and during the oil crisis in the late 1970s 
C)  during the Great Depression and just before the financial crisis of 2007 
D)  during the Great Depression and during World War II 
A)  during World War II and during the oil crisis in the late 1970s 
B)  during the Great Depression and during the oil crisis in the late 1970s 
C)  during the Great Depression and just before the financial crisis of 2007 
D)  during the Great Depression and during World War II

Question 13

Higher interest rates

Accepted Answer

A)  lower the opportunity cost of using funds for investment, and they increase investment. 
B)  increase the opportunity cost of using funds for investment, and they increase investment. 
C)  increase the opportunity cost of using funds for investment, and they reduce investment. 
D)  lower the opportunity cost of using funds for investment, and they reduce investment. 
A)  lower the opportunity cost of using funds for investment, and they increase investment. 
B)  increase the opportunity cost of using funds for investment, and they increase investment. 
C)  increase the opportunity cost of using funds for investment, and they reduce investment. 
D)  lower the opportunity cost of using funds for investment, and they reduce investment.

Question 14

In the short run, a decrease in the interest rate

Accepted Answer

A)  will shift the aggregate demand curve to the right. 
B)  will shift the investment demand curve to the right. 
C)  will shift the long-run aggregate supply curve to the right. 
D)  will shift the short-run aggregate supply curve to the right. 
A)  will shift the aggregate demand curve to the right. 
B)  will shift the investment demand curve to the right. 
C)  will shift the long-run aggregate supply curve to the right. 
D)  will shift the short-run aggregate supply curve to the right.

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

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 17

All of the following shifts the investment demand curve except

Accepted Answer

A)  an increase in the capital gains tax rate. 
B)  monetary policy that lowers the interest rate. 
C)  fiscal policy that affect the cost of holding capital, for example allowing accelerated depreciation. 
D)  an increase in the capacity utilization rate of capital. 
A)  an increase in the capital gains tax rate. 
B)  monetary policy that lowers the interest rate. 
C)  fiscal policy that affect the cost of holding capital, for example allowing accelerated depreciation. 
D)  an increase in the capacity utilization rate of capital.

Question 18

Use the following to answer questions .
Exhibit: Investment Demand  
-(Exhibit: Investment Demand) 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 19

Use the following to answer questions.
Exhibit: Aggregate Demand and Investment 1  
-(Exhibit: Aggregate Demand and Investment 1) 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 discourage investment to close the inflationary gap. 
B)  reduce interest rates and encourage investment to close the recessionary gap. 
C)  increase interest rates and encourage investment to close the inflationary gap. 
D)  reduce interest rates and discourage investment to close the recessionary gap. 
A)  increase interest rates and discourage investment to close the inflationary gap. 
B)  reduce interest rates and encourage investment to close the recessionary gap. 
C)  increase interest rates and encourage investment to close the inflationary gap. 
D)  reduce interest rates and discourage investment to close the recessionary gap.

Question 20

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

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

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

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

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

Which of the following is true regarding investment?

Net private investment equals

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

The investment demand curve shows

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

An investment tax credit is a type of capital gains tax.

Which of the following is considered investment?

In the last 80 years, the United States recorded a negative net private domestic investment during three periods. Which of the following are examples of two such periods?

Higher interest rates

In the short run, a decrease in the interest rate

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

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

All of the following shifts the investment demand curve except

Use the following to answer questions . Exhibit: Investment Demand -(Exhibit: Investment Demand) Which panel shows the result of higher interest rates?

Use the following to answer questions. Exhibit: Aggregate Demand and Investment 1 -(Exhibit: Aggregate Demand and Investment 1) The economy is in short-run equilibrium. To move the economy to a long-run equilibrium, policy makers should

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.

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

Exam 14: Investment and Economic Activity

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

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

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

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

Which of the following is true regarding investment?

Net private investment equals

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

The investment demand curve shows

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

An investment tax credit is a type of capital gains tax.

Which of the following is considered investment?

In the last 80 years, the United States recorded a negative net private domestic investment during three periods. Which of the following are examples of two such periods?

Higher interest rates

In the short run, a decrease in the interest rate

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

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

All of the following shifts the investment demand curve except

Use the following to answer questions . Exhibit: Investment Demand -(Exhibit: Investment Demand) Which panel shows the result of higher interest rates?

Use the following to answer questions. Exhibit: Aggregate Demand and Investment 1 -(Exhibit: Aggregate Demand and Investment 1) The economy is in short-run equilibrium. To move the economy to a long-run equilibrium, policy makers should

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.

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