Macroeconomics: Principles and Policy (MindTap Course List)
13th Edition
ISBN: 9781305280601
Author: William J. Baumol, Alan S. Blinder
Publisher: Cengage Learning
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Chapter 8, Problem 1DQ
To determine
To differentiate: The use of the term ‘investment’ when described by a common man and an Economist.
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Explain the difference between the stock variable and a flow variable in economics with one example of each.
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Question 9
Which of the following is the best example of an economic investment?
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A retiree purchases U.S. Treasury bonds
A company like Bank of America acquires another company like Merrill Lynch
Chapter 8 Solutions
Macroeconomics: Principles and Policy (MindTap Course List)
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- Suppose that society decided to reduce consumption and increase investment. Briefly explain what groups in society would benefit from this change?arrow_forwardWhen does the optimal investment schedule shift?arrow_forwardWhich of the following is an example of economic investment? ABC Corporation buys an a run-down farm from XYZ Corporation. XYZ Cement Corporation buys a new truck that increases delivery to customers. Michael Daily buys shares of stock in Intel Corporation. Carlos Montana buys U.S. savings bonds.arrow_forward
- Classify each of the following based on the macroeconomic definitions of saving and investment. Saving Investment Neha borrows money to build a new lab for her engineering firm. Teresa purchases stock in Pherk, a pharmaceutical company. Sam purchases a new condominium in San Francisco. Lorenzo purchases a certificate of deposit at his bank.arrow_forwardExplain the determinants of investment. Include in your answer an explanation of how a change in each determinant affects investment.arrow_forwardWhich of the following can cause planned investment by firms to increase? a. To reduce constant budget deficits, the government announces plans to increase the corporate tax rate. b. An increase in the interest rate due to an increase in the cost of making financial transactions. c. Firms become optimistic about economic conditions after seeing reports of strong growth in consumer spending. d. A major recession has reduced consumption spending, hurting profit levels for high-end car manufacturers.arrow_forward
- Explain how changes in interest rates and rates of return on various investment options will affect the amount of money that businesses are willing to invest to increase output.arrow_forwardAgain, the following graph depicts the market for loanable funds. An investment tax credit effectively lowers the tax bill of any firm that purchases new capital in the relevant time period. Suppose the government repeals a previously existing investment tax credit. Shift the appropriate curve(s) on the following graph to show the impact of this policy. INTEREST RATE (Percent) pemand Supply QTY OF LOANABLE FUNDS (Billions of dollars) The repeal of the previously existing tax credit causes the interest rate to and the level of investment toarrow_forwardWhich of the following questions would be studied in the area of microeconomics? Select one: a. What determines the number of hours an individual works? b. Do interest rates affect net exports? c. Will an increase in government spending cause inflation? d. What portion of total spending comes from households in the economy?arrow_forward
- Which of the following situations represents investment? Saving? ExplainYour family takes out a mortgage and buys a new house. You use your paycheque to buy stock in Sagicor Financial Services.arrow_forwardClassify each of the following scenarios listed in the table below using the macroeconomic definitions of saving and investment. Saving Investment Manuel buys a government bond. Poornima borrows money to build an addition to a lab owned by her engineering firm. Valerie purchases shares of stock in Warm Breeze, a cloud computing company. Shen takes out a loan and uses it to build a new cabin in Idaho.arrow_forwardHi can you please answer this questionarrow_forward
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