thetical economy, no investment projects are undertaken when the real interest rate is 12 percent or above, 40 projects worth each are undertaken when the real interest rate is 10 percent, and 40 more projects worth $1 million each are undertaken e the real interest rate falls by 2 percent until it reaches a value of zero. a graph showing the investment demand curve. Plot 7 points in total using the line tool (investment demand curve) given below. Investment Demand Curve Tools investment de 6 4 2 40 80 120 160 200 240 280 Investment (2017 $ million)

thetical economy, no investment projects are undertaken when the real interest rate is 12 percent or above, 40 projects worth each are undertaken when the real interest rate is 10 percent, and 40 more projects worth $1 million each are undertaken e the real interest rate falls by 2 percent until it reaches a value of zero. a graph showing the investment demand curve. Plot 7 points in total using the line tool (investment demand curve) given below. Investment Demand Curve Tools investment de 6 4 2 40 80 120 160 200 240 280 Investment (2017 $ million)

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

In a hypothetical economy, no investment projects are undertaken when the real interest rate is 12 percent or above, 40 projects worth
$1 million each are undertaken when the real interest rate is 10 percent, and 40 more projects worth $1 million each are undertaken
every time the real interest rate falls by 2 percent until it reaches a value of zero.
a. Draw a graph showing the investment demand curve. Plot 7 points in total using the line tool (investment demand curve) given below.
Investment Demand Curve
14
Tools
12
investment de
10
8.
6.
4.
40
80
120 160 200 240 280
Investment (2017 $ million)
b. If the real interest rate is 6% then $
million of investment will take place in this economy.
c. If the real interest rate rises to 4% then investment (Click to select) V to $
million.
Real Rate of Return and Interest (%)

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