INTEREST RATE (Percent) 14 13 12 16 15 653 2 = 0 11 10 Investment Function 88 M 5 4 3 2 1 0 0 25 50 75 100 125 150 175 200 REAL INVESTMENT (Billions of dollars) Determine how each of the following events will shift the investment demand (I) curve. ? Event Number 1. Event An increase in business taxes will cause the investment demand curve to shift to the 2. Firms having excess inventories of finished goods because the economy is overstocked with production facilities will cause the investment demand curve to shift to the The following table shows the expected rate of profit and the cumulative amount of investment with that rate of profit or higher in a hypothetical economy. For example, $50 billion worth of investment projects have an expected rate of profit that is greater than or equal to 11%. Put another way, at an interest rate of 11%, the amount of investment demanded equals $50 billion. Expected Rate of Profit Cumulative Investment at this Rate of Profit or Higher (Percent) 14 11 8 5 (Billions of Dollars) 25 50 75 100 Using the blue points (circle symbol), plot the hypothetical economy's investment demand curve (I) on the graph. Line segments will automatically connect the points. ST RATE (Percent) 14 65132 11 10 Investment Function ?
INTEREST RATE (Percent) 14 13 12 16 15 653 2 = 0 11 10 Investment Function 88 M 5 4 3 2 1 0 0 25 50 75 100 125 150 175 200 REAL INVESTMENT (Billions of dollars) Determine how each of the following events will shift the investment demand (I) curve. ? Event Number 1. Event An increase in business taxes will cause the investment demand curve to shift to the 2. Firms having excess inventories of finished goods because the economy is overstocked with production facilities will cause the investment demand curve to shift to the The following table shows the expected rate of profit and the cumulative amount of investment with that rate of profit or higher in a hypothetical economy. For example, $50 billion worth of investment projects have an expected rate of profit that is greater than or equal to 11%. Put another way, at an interest rate of 11%, the amount of investment demanded equals $50 billion. Expected Rate of Profit Cumulative Investment at this Rate of Profit or Higher (Percent) 14 11 8 5 (Billions of Dollars) 25 50 75 100 Using the blue points (circle symbol), plot the hypothetical economy's investment demand curve (I) on the graph. Line segments will automatically connect the points. ST RATE (Percent) 14 65132 11 10 Investment Function ?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Transcribed Image Text:INTEREST RATE (Percent)
14
13
12
16
15
653 2 = 0
11
10
Investment Function
88
M
5
4
3
2
1
0
0
25
50
75
100
125
150
175
200
REAL INVESTMENT (Billions of dollars)
Determine how each of the following events will shift the investment demand (I) curve.
?
Event Number
1.
Event
An increase in business taxes will cause the investment demand curve to shift to the
2.
Firms having excess inventories of finished goods because the economy is overstocked
with production facilities will cause the investment demand curve to shift to the
Transcribed Image Text:The following table shows the expected rate of profit and the cumulative amount of investment with that rate of profit or higher in a hypothetical
economy. For example, $50 billion worth of investment projects have an expected rate of profit that is greater than or equal to 11%. Put another way,
at an interest rate of 11%, the amount of investment demanded equals $50 billion.
Expected Rate of Profit Cumulative Investment at this Rate of Profit or Higher
(Percent)
14
11
8
5
(Billions of Dollars)
25
50
75
100
Using the blue points (circle symbol), plot the hypothetical economy's investment demand curve (I) on the graph. Line segments will automatically
connect the points.
ST RATE (Percent)
14
65132
11
10
Investment Function
?
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