Economics:
10th Edition
ISBN: 9781285859460
Author: BOYES, William
Publisher: Cengage Learning
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Question
Chapter 9, Problem 5E
To determine
(a)
To write:
The investment is autonomously given. Drawing an investment function and show its shift when interest rate falls.
To determine
(b)
To write:
The investment is autonomously given. Drawing an investment function and show its shift when an investment tax is repealed.
To determine
(c)
To write:
The investment is autonomously given. Drawing an investment function and show its shift when the new president has pro-business policy.
To determine
(d)
To write:
The investment is autonomously given. Drawing an investment function and show its shift when there is excess capacity in the economy.
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Students have asked these similar questions
Derive the investment function (using the neoclassical model of investment). Explain how investment responds to changes in Marginal Product of Capital and interest rate.
Explain the determinants of investment. Include in your answer an explanation of how a change in each determinant affects investment.
In what direction will each of the following occurrences shift the investment demand curve, other things equal?
a. An increase in unused production capacity occurs.
b. Business taxes decline.
c. The cost of equipment fall.
d. Widespread pessimism arises about future business conditions and sales revenue.
e. A major new technological breakthrough creates prospects for a wide range of profitable new products.
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Similar questions
- Which of the following would not cause shift in the investment demand curve as the above graph shows? Select one: a. Business taxes b. Expectations c. Changes in real interest rates d. Acquisition, maintenance, and operating costs e. Technological changearrow_forwardLooking at business fixed investment, elaborate on why investment is negatively related to theinterest rates.b. Using the Tobin’s q theory, elaborate on the relationship between investment and capitalstock?c. If the market value of firm A is $1.5 million and the replacement cost of capital is $450,000, find the Tobin's q.d. Should the firm replace capital? Elaborate on your response.arrow_forward1.11 If desired investment exceeds actual investment, then…a) The economy is in a recession.b) Inventories are less than the desired level.c) Inventories are accumulating beyond the desired levels.d) Cyclical unemployment exists. 1.12 Read the following extract and answer the question that follows. Women’s empowerment movement eyes 40% of government spending accreditation…Last year the South African government affirmed its support for women-owned businesses as part of its commitment to ensuring that gender equality in Africa’s most advanced economy was achieved. President Cyril Ramaphosa said then: “We are going to drive women’s economic inclusion through public procurement. We have set the target of ensuring that 40% of goods and services procured by public entities are procured from women-owned business.” Source: https://www.news24.com/citypress/news/womens-empowerment-movement-eyes-40-of-government-spending-20210819The above decision by the South African government is an example…arrow_forward
- 1.11 If desired investment exceeds actual investment, then…a) The economy is in a recession.b) Inventories are less than the desired level.c) Inventories are accumulating beyond the desired levels.d) Cyclical unemployment exists. 1.12 Read the following extract and answer the question that follows. Women’s empowerment movement eyes 40% of government spending accreditation…Last year the South African government affirmed its support for women-owned businesses as part of its commitment to ensuring that gender equality in Africa’s most advanced economy was achieved. President Cyril Ramaphosa said then: “We are going to drive women’s economic inclusion through public procurement. We have set the target of ensuring that 40% of goods and services procured by public entities are procured from women-owned business.” The above decision by the South African government is an example of…a) Market participation.b) Government spending.c) Commercialisation.d) Nationalisation. 1.13 Read the following…arrow_forwardExplain what happens to consumption, investment, and the interest rate when the government increases taxes. Show graphically the effect of increased taxes when saving is not dependent on interest rate.arrow_forwardWhich of the following will increase the slope of the demand curve in the goods market to indicate an increase in the level of output and income? Select one: a. An increase in autonomous investment. b. An increase in the marginal propensity to consume. c. An increase in government spending. d. An increase in taxation.arrow_forward
- Consider an economy that is described by the following: Autonomous consumption = 100 Autonomous investment = 100 Marginal propensity to consume = 0.75 a. What is the consumption function of this economy? b. Derive the equilibrium income of this economy? c. How large is the change in the equilibrium income if investment rises to 200?arrow_forwardHow does investment as defined by economists differ from investment as defifined by the general public? What would happen to the amount of investment made today if firms expected the future returns to such investment to be very low? What if firms expected future returns to be very high?arrow_forwardWhat are the basic determinants of investment? Explain the relationship between the real interest rate and the level of investment. Why is investment spending unstable? How is it possible for investment spending to increase even in a period in which the real interest rate rises?arrow_forward
- What is the proponsity to consumption function? explain with formulae of average propensity to consume in micro economy.arrow_forwardGovernments attempt to stimulate economics by offering firms temporary investment taxcredits. Explain the effects of this measure on investment spending. Would you expect apermanent or temporary measure to have more effect?arrow_forwardExplain what happens to consumption, investment, and the interest rate when the government increases taxes.arrow_forward
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