ECO 2010 INCLUSIVE ACCESS
ECO 2010 INCLUSIVE ACCESS
21st Edition
ISBN: 9781260564624
Author: McConnell
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 31, Problem 1DQ
To determine

The difference between investment schedule and investment demand curve.

Expert Solution & Answer
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Explanation of Solution

An investment schedule depicts the levels of investment made at different levels of gross domestic product (GDP). If the level of national income is higher, then the level of investment would be high and vice versa. It shows that there is a positive relationship which exists among GDP or the national income and investment.

Whereas, the investment demand curve shows the level of investment made at different levels of interest rate and expected return. If the expected return from the investment is greater, then the level of investment is higher and vice versa. Thus, there is a positive relationship between the investment demand and expected return.

If the interest rate is higher, then the cost of borrowing would be greater which in turn reduces the return from the investment. Thus, increasing interest leads to reduce the demand for investment and vice versa. There is a negative relationship exist among the demand for investment and interest rate.

Economics Concept Introduction

Concept Introduction:

Investment schedule: An investment schedule shows the level of demand for investment at different levels of national income.

Investment demand curve: The investment demand curve depicts the value of investment projects demanded at every given interest rate.

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