Assume there are no investment projects in the economy that yield an expected rate of return of 25 percent or more. But supposethere are $10 billion of investment projects yielding expected returns of between 20 and 25 percent; another $10 billion yieldingbetween 15 and 20 percent; another $10 billion yielding between 10 and 15 percent; and so forth.a. Cumulate these data and present them graphically using the graph below, putting the expected rate of return (and the real interestrate) on the vertical axis and the amount of investment on the horizontal axis.Instructions: Use the tool provided 'ID' to plot the investment demand curve (plot 6 points total).30ToolsID201510102030405060Investment (billions of dollars)Instructions: Enter your answers as a whole number.b. What will be the equilibrium level of aggregate investment if the real interest rate is:15 percent: $billion10 percent: $billion5 percent: $billionExpected rate of return, percent25

a) We are given that I = 0 B, when r = 25%, I = 10 B when r = 20%, I = 20 B when r = 15% and so we…

structions: Enter your answers as a whole number. What will be the equilibrium level of aggregate investment if the real interest rate is: 15 percent: $ |billion 10 percent: $ | billion 5 percent: $ | billion

structions: Enter your answers as a whole number. What will be the equilibrium level of aggregate investment if the real interest rate is: 15 percent: $ |billion 10 percent: $ | billion 5 percent: $ | billion

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Assume there are no investment projects in the economy that yield an expected rate of return of 25 percent or more. But suppose
there are $10 billion of investment projects yielding expected returns of between 20 and 25 percent; another $10 billion yielding
between 15 and 20 percent; another $10 billion yielding between 10 and 15 percent; and so forth.
a. Cumulate these data and present them graphically using the graph below, putting the expected rate of return (and the real interest
rate) on the vertical axis and the amount of investment on the horizontal axis.
Instructions: Use the tool provided 'ID' to plot the investment demand curve (plot 6 points total).
30
Tools
ID
20
15
10
10
20
30
40
50
60
Investment (billions of dollars)
Instructions: Enter your answers as a whole number.
b. What will be the equilibrium level of aggregate investment if the real interest rate is:
15 percent: $
billion
10 percent: $
billion
5 percent: $
billion
Expected rate of return, percent
25

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