Macroeconomics
21st Edition
ISBN: 9781259915673
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Chapter 10.5, Problem 4QQ
To determine
Investment demand curve.
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The above schedule indicates that if the real interest rate is 6 percent, then:
Select one:
a. $25 billion of investment will be undertaken.
b. we cannot tell what volume of investment will be profitable.
c. $40 billion of investment will be undertaken
d. $30 billion will be both saved and invested.
If firms are less optimistic that future profits will rise and remain strong for the next few years, then:
Select one:
a. investment spending will fall.
b. investment spending will rise.
c. investment spending will remain unaffected.
d. investment spending will rise at first, then fall.
The real interest rate increases and investment increases.
_____ a. The real interest rate increases and investment increases
b. The real interest rate decreases and investment decreases.
c. The real interest rate increases and investment decreases.
d. Cannot be determined from the given information
Chapter 10 Solutions
Macroeconomics
Ch. 10.2 - Prob. 1QQCh. 10.2 - Prob. 2QQCh. 10.2 - Prob. 3QQCh. 10.2 - Prob. 4QQCh. 10.5 - Prob. 1QQCh. 10.5 - Prob. 2QQCh. 10.5 - Prob. 3QQCh. 10.5 - Prob. 4QQCh. 10 - Prob. 1DQCh. 10 - Prob. 2DQ
Ch. 10 - Prob. 3DQCh. 10 - Prob. 4DQCh. 10 - Prob. 5DQCh. 10 - Prob. 6DQCh. 10 - Prob. 7DQCh. 10 - Prob. 8DQCh. 10 - Prob. 9DQCh. 10 - Prob. 1RQCh. 10 - Prob. 2RQCh. 10 - Prob. 3RQCh. 10 - Prob. 4RQCh. 10 - Prob. 5RQCh. 10 - Prob. 6RQCh. 10 - Prob. 7RQCh. 10 - Prob. 8RQCh. 10 - Prob. 9RQCh. 10 - Prob. 1PCh. 10 - Prob. 2PCh. 10 - Prob. 3PCh. 10 - Prob. 4PCh. 10 - Prob. 5PCh. 10 - Prob. 6PCh. 10 - Prob. 7PCh. 10 - Prob. 8PCh. 10 - Prob. 9PCh. 10 - Prob. 10P
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- b. Explain the difference between saving and investment as defined by a macroeconomist. c. Which of the following situations in c (i) & c (ii) represent investment? Saving? Explain(i) Your family takes out a mortgage and buys a new house. (ii) You use your paycheque to buy stock in Sagicor Financial Services.arrow_forwardHow does a decrease in interest rates typically affect consumer spending and investment? A. Consumer spending decreases, investment increases B. Consumer spending increases, investment decreases C. Both consumer spending and investment increase D. Both consumer spending and investment decreasearrow_forwardAssume that consumption decreases, when interest rates increase. If there is a technological advance that leads to an increase in investment demand, then: A. investment increases and the interest rate rises. B. investment and the interest rate are both unchanged. C. investment is unchanged and the interest rate rises. D. investment decreases and the interest rate rises.arrow_forward
- Suppose that GDP is $8 billion, taxes are $1.5 billion, private saving is $0.5 billion, and public saving is 0.2 billion. Assuming the economy is closed, calculate the size of:(i) Consumption (ii) Investment (iii) Government Spending (iv) National Savings b. Explain the difference between saving and investment as defined by a macroeconomist. c. Which of the following situations in c (i) & c (ii) represent investment? Saving? Explain(i) Your family takes out a mortgage and buys a new house. (ii) You use your paycheque to buy stock in Sagicor Financial Services.arrow_forwardThe table sets out the data for an economy when the government's budget is balanced. Calculate the equilibrium real interest rate, investment, and private saving. If planned saving increases by $0.5 trillion at each real interest rate, explain the change in the real interest rate. If planned investment increases by $1 trillion at each real interest rate, explain the change in saving and the real interest rate. The real interest rate is >>> Answer to 1 decimal place. percent a year. C Real interest rate (percent per year) 4 56885 7 9 10 Loanable funds Loanable funds supplied (trillions of 2009 dollars) demanded 7.0 6.5 6.0 5.5 5.0 4.5 4.0 5.0 5.5 6.0 6.5 7.0 7.5 8.0arrow_forward7, How will planned investment spending change as the following events occur? a. The interest rate falls as a result of Federal Reserve policy. b. The U.S. Environmental Protection Agency decrees that corporations must upgrade or replace their machinery in order to reduce their emissions of sul- fur dioxide. c. Baby boomers begin to retire in large numbers and reduce their savings, resulting in higher interest rates.arrow_forward
- You deposit $200 in a savings account on January 1, and the bank pays you interest of $10 at the end of the year. During the year, the average price level rises by 2 percent. What is the real interest rate on your savings account? The real interest rate on your savings account is _______. A. 3 percent a year B. 2 percent a year C. $6 D. 6 percent a yeararrow_forwardan increase in the expected real interest rate tends to raise desired saving, but lower desired investment. Explain how and why? Also give an example.arrow_forwarda. Looking at business fixed investment, explain why investment is negatively related to the interest rates.b. Using the Tobin’s q theory, explain the relationship between investment and capital stock?arrow_forward
- Gladys agrees to lend Kay $1,000 for one year at a nominal rate of interest of 5 percent. At the end of the year prices have actually risen by 7 percent.A. Gladys earns extra real income.B. Neither party gains or loses if the loan is repaid.C. Kay receives extra real income.D. Kay loses extra real income.arrow_forwardANSWER ALL THE QUESTIONS..... PLEASE IT'S URGENT... In a given year, a country's GDP = $9,841, net factor payments from abroad = $889, taxes = $869, transfers received from the government = $296, interest payments on the government's debt = $103, consumption = $7,863, and government purchases = $140. The country had private saving equal to A) $285. B) $3,850. C) $2,397. D) $2,112. Let’s continue with the information given in the previous question. The country had government saving equal to A) $285. B) $330. C) $453. D) $542. 3. Suppose that national saving is $1,456 billion, investment is $1,945 billion, and private saving is $1,590 billion. How much is the current account balance? A) $489 billion B) $221 billion C) -$221 billion D) -$489 billionarrow_forwardExplain the difference between saving and investment as defined by a macroeconomist. Which of the following situations represent investment and which represent saving? Explain.a. Your family takes out a mortgage and buys a new house.You use your $200 paycheck to buy stock in Africel.Your roommate earns $100 and deposits it in his account at a bank.You borrow $1,000 from a bank to buy a car to use in your pizza delivery business.The interest rate is 7 percent. Use the concept of present value to compare $200 to be received in 10 years and $300 to be received in 20 years.A company has an investment project that would cost $10 million today and yield a payoff of $15 million in 4 years.Should the firm undertake the project if the interest rate is 11 percent? 10 percent? 9 percent? 8 percent?Can you figure out the exact cutoff for the interest rate between profitability and nonprofitability?arrow_forward
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