Question 1

If the Fed wishes to reduce aggregate demand, it will conduct an open market

Accepted Answer

A)  sale which will lower bond prices, lower interest rates, and stimulate investment. 
B)  purchase which will lower bond prices, lower interest rates, and discourage investment. 
C)  sale which will lower bond prices, raise interest rates, and discourage investment. 
D)  purchase which will raise bond prices, lower interest rates, and stimulate investment. 
A)  sale which will lower bond prices, lower interest rates, and stimulate investment. 
B)  purchase which will lower bond prices, lower interest rates, and discourage investment. 
C)  sale which will lower bond prices, raise interest rates, and discourage investment. 
D)  purchase which will raise bond prices, lower interest rates, and stimulate investment. C

Question 2

Consider the following two events: (i) an increase in the cost of new capital goods; and (ii) a decrease in corporate income tax rates. How will these events affect the demand for investment?

Accepted Answer

A)  The demand for investment increases. 
B)  The demand for investment decreases. 
C)  The two events have opposite effects on investment. Therefore, the demand for investment remains the same. 
D)  These events have an indeterminate effect on the demand for investment. 
A)  The demand for investment increases. 
B)  The demand for investment decreases. 
C)  The two events have opposite effects on investment. Therefore, the demand for investment remains the same. 
D)  These events have an indeterminate effect on the demand for investment. D

Question 3

Use the following to answer questions .
Exhibit: Investment Demand  
-(Exhibit: Investment Demand) Which panel shows the result of the realization that the capital stock is very large and greater than the desired level?

Accepted Answer

A)  Panel (a) 
B)  Panel (b) 
C)  Panel (c), a movement from B to A 
D)  Panel (c), a movement from A to B 
A)  Panel (a) 
B)  Panel (b) 
C)  Panel (c), a movement from B to A 
D)  Panel (c), a movement from A to B B

Question 4

Use the following to answer questions .
Exhibit: Investment and Production Possibilities  
-(Exhibit: Investment and Production Possibilities) A movement from point s to point t on curve B is likely to cause the economy to shift from

Accepted Answer

A)  curve B to curve A. 
B)  curve A to curve B. 
C)  curve B to curve C. 
D)  curve C to curve A. 
A)  curve B to curve A. 
B)  curve A to curve B. 
C)  curve B to curve C. 
D)  curve C to curve A.

Question 5

Use the following to answer questions .
Exhibit: Investment and Production Possibilities  
-(Exhibit: Investment and Production Possibilities) Given that the economy is on curve B, it is most likely to achieve curve C or beyond if it allocates resources to produce at

Accepted Answer

A)  point r. 
B)  point s. 
C)  point t. 
D)  point u. 
A)  point r. 
B)  point s. 
C)  point t. 
D)  point u.

Question 6

Use the following to answer questions .
Exhibit: Investment Projects
  
-(Exhibit: Investment Projects) If the market interest rate declines from 15% to 13%, what happens to the quantity of investment demanded?

Accepted Answer

A)  It decreases by $2,200 because investment is now less profitable. 
B)  It decreases by $1,000 because investment is now less profitable. 
C)  It increases by $200 because investment is now more profitable. 
D)  It increases by $2,200 because investment is now more profitable. 
A)  It decreases by $2,200 because investment is now less profitable. 
B)  It decreases by $1,000 because investment is now less profitable. 
C)  It increases by $200 because investment is now more profitable. 
D)  It increases by $2,200 because investment is now more profitable.

Question 7

Which of the following is a component of investment?

Accepted Answer

A)  A travel agency purchases new software to update its reservations process. 
B)  Karla buys an existing home in Oakland, California. 
C)  Sharon, a college student, purchases "MathType," a mathematical equation editing software. 
D)  Wen Kew buys a used delivery truck for his furniture business. 
A)  A travel agency purchases new software to update its reservations process. 
B)  Karla buys an existing home in Oakland, California. 
C)  Sharon, a college student, purchases "MathType," a mathematical equation editing software. 
D)  Wen Kew buys a used delivery truck for his furniture business.

Question 8

Which of the following is classified as spending on investment?
I. new residential construction
II. business spending on new equipment
III. business spending on structures such as office buildings
IV. purchase of government bonds

Accepted Answer

A)  II and III only 
B)  II, III, and IV only 
C)  I, II, and III only 
D)  I, II, III, and IV 
A)  II and III only 
B)  II, III, and IV only 
C)  I, II, and III only 
D)  I, II, III, and IV

Question 9

The reduction of a firm's tax liability by a fraction of its investment during a period is a(n)

Accepted Answer

A)  investment tax credit. 
B)  balanced budget amendment. 
C)  capital gains tax. 
D)  real estate tax. 
A)  investment tax credit. 
B)  balanced budget amendment. 
C)  capital gains tax. 
D)  real estate tax.

Question 10

Use the following to answer questions .
Exhibit: Aggregate Demand and Investment 2  
-(Exhibit: Aggregate Demand and Investment 2) The economy is in short-run equilibrium. If policymakers want to use monetary policy to improve economic performance, they should

Accepted Answer

A)  buy bonds to reduce investment and aggregate demand. 
B)  sell bonds to reduce investment and aggregate demand. 
C)  buy bonds to reduce investment and short run aggregate supply. 
D)  sell bonds to reduce investment and short run aggregate supply. 
A)  buy bonds to reduce investment and aggregate demand. 
B)  sell bonds to reduce investment and aggregate demand. 
C)  buy bonds to reduce investment and short run aggregate supply. 
D)  sell bonds to reduce investment and short run aggregate supply.

Question 11

Net investment adds to the nation's capital stock.

Accepted Answer

A) True 
 B)False

Question 12

Use the following to answer questions .
Exhibit: Investment Demand  
-(Exhibit: Investment Demand) Which panel shows the result of a lower interest rate?

Accepted Answer

A)  Panel (a) 
B)  Panel (b) 
C)  Panel (c), a movement from B to A 
D)  Panel (c), a movement from A to B 
A)  Panel (a) 
B)  Panel (b) 
C)  Panel (c), a movement from B to A 
D)  Panel (c), a movement from A to B

Question 13

Which of the following will shift the investment demand curve to the right?

Accepted Answer

A)  The imposition of government regulations that reduce the incentive to produce, for example, more stringent environmental regulation 
B)  An increase in the rate of new technological innovations. 
C)  An increase in the cost of new capital goods 
D)  A decrease in the market interest rate 
A)  The imposition of government regulations that reduce the incentive to produce, for example, more stringent environmental regulation 
B)  An increase in the rate of new technological innovations. 
C)  An increase in the cost of new capital goods 
D)  A decrease in the market interest rate

Question 14

An increase in the interest rate causes a decrease in investment by shifting the investment demand curve to the left.

Accepted Answer

A) True 
 B)False

Question 15

Use the following to answer questions .
Exhibit: The Economy's Investment Demand Schedule
  
-(Exhibit: The Economy's Investment Demand Schedule) If the interest rate falls from 20% to 15%, what is the change in the amount of investment?

Accepted Answer

A)  Less than $10 billion 
B)  $10 billion 
C)  $25 billion 
D)  $35 billion 
A)  Less than $10 billion 
B)  $10 billion 
C)  $25 billion 
D)  $35 billion

Question 16

During the Great Depression, capital stock in the United States was reduced since

Accepted Answer

A)  gross investment was negative. 
B)  gross investment was above depreciation. 
C)  gross investment was below depreciation. 
D)  gross investment was equal to depreciation. 
A)  gross investment was negative. 
B)  gross investment was above depreciation. 
C)  gross investment was below depreciation. 
D)  gross investment was equal to depreciation.

Question 17

If gross private domestic investment exceeds depreciation, then

Accepted Answer

A)  net private domestic investment is positive. 
B)  net private domestic investment is negative. 
C)  the capital stock is declining. 
D)  the capital stock is unchanged. 
A)  net private domestic investment is positive. 
B)  net private domestic investment is negative. 
C)  the capital stock is declining. 
D)  the capital stock is unchanged.

Question 18

Use the following to answer questions .
Exhibit: Money and Investment  
-(Exhibit: Money and Investment) If the money supply is decreased in Panel (a) from MS1 to MS2, then in Panel (b),

Accepted Answer

A)  there is a movement along the investment demand curve from D to C. 
B)  there is a movement along the investment demand curve from C to D. 
C)  the investment demand curve shifts to the right. 
D)  the investment demand curve shifts to the left. 
A)  there is a movement along the investment demand curve from D to C. 
B)  there is a movement along the investment demand curve from C to D. 
C)  the investment demand curve shifts to the right. 
D)  the investment demand curve shifts to the left.

Question 19

Which of the following is the largest and fastest growing component of gross private domestic investment in the United States between 1995 and 2011?

Accepted Answer

A)  Change in private inventories 
B)  Residential investment 
C)  Nonresidential equipment and software 
D)  Nonresidential structures 
A)  Change in private inventories 
B)  Residential investment 
C)  Nonresidential equipment and software 
D)  Nonresidential structures

Question 20

An increase in interest rate will cause a(n)

Accepted Answer

A)  increase in the investment demand curve. 
B)  decrease in the investment demand curve. 
C)  movement up along the investment demand curve. 
D)  movement down along the investment demand curve. 
A)  increase in the investment demand curve. 
B)  decrease in the investment demand curve. 
C)  movement up along the investment demand curve. 
D)  movement down along the investment demand curve.

If the Fed wishes to reduce aggregate demand, it will conduct an open market

Consider the following two events: (i) an increase in the cost of new capital goods; and (ii) a decrease in corporate income tax rates. How will these events affect the demand for investment?

Use the following to answer questions . Exhibit: Investment Demand -(Exhibit: Investment Demand) Which panel shows the result of the realization that the capital stock is very large and greater than the desired level?

Use the following to answer questions . Exhibit: Investment and Production Possibilities -(Exhibit: Investment and Production Possibilities) A movement from point s to point t on curve B is likely to cause the economy to shift from

Use the following to answer questions . Exhibit: Investment and Production Possibilities -(Exhibit: Investment and Production Possibilities) Given that the economy is on curve B, it is most likely to achieve curve C or beyond if it allocates resources to produce at

Use the following to answer questions . Exhibit: Investment Projects -(Exhibit: Investment Projects) If the market interest rate declines from 15% to 13%, what happens to the quantity of investment demanded?

Which of the following is a component of investment?

Which of the following is classified as spending on investment? I. new residential construction II. business spending on new equipment III. business spending on structures such as office buildings IV. purchase of government bonds

The reduction of a firm's tax liability by a fraction of its investment during a period is a(n)

Use the following to answer questions . Exhibit: Aggregate Demand and Investment 2 -(Exhibit: Aggregate Demand and Investment 2) The economy is in short-run equilibrium. If policymakers want to use monetary policy to improve economic performance, they should

Net investment adds to the nation's capital stock.

Use the following to answer questions . Exhibit: Investment Demand -(Exhibit: Investment Demand) Which panel shows the result of a lower interest rate?

Which of the following will shift the investment demand curve to the right?

An increase in the interest rate causes a decrease in investment by shifting the investment demand curve to the left.

Use the following to answer questions . Exhibit: The Economy's Investment Demand Schedule -(Exhibit: The Economy's Investment Demand Schedule) If the interest rate falls from 20% to 15%, what is the change in the amount of investment?

During the Great Depression, capital stock in the United States was reduced since

If gross private domestic investment exceeds depreciation, then

Use the following to answer questions . Exhibit: Money and Investment -(Exhibit: Money and Investment) If the money supply is decreased in Panel (a) from MS₁ to MS₂, then in Panel (b),

Which of the following is the largest and fastest growing component of gross private domestic investment in the United States between 1995 and 2011?

An increase in interest rate will cause a(n)

Economics: the Study of Choice

Demand and Supply

Applications of Supply and Demand

Macroeconomics: the Big Picture

Measuring Total Output and Income

Aggregate Demand and Aggregate Supply

Economic Growth

The Nature and Creation of Money

Financial Markets and the Economy

Monetary Policy and the Fed

Government and Fiscal Policy

Consumption and the Aggregate Expenditures Model

Net Exports and International Finance

Inflation and Unemployment

A Brief History of Macroeconomic Thought and Policy

Inequality, Poverty, and Discrimination

Filters

Exam 14: Investment and Economic Activity

If the Fed wishes to reduce aggregate demand, it will conduct an open market

Consider the following two events: (i) an increase in the cost of new capital goods; and (ii) a decrease in corporate income tax rates. How will these events affect the demand for investment?

Use the following to answer questions . Exhibit: Investment Demand -(Exhibit: Investment Demand) Which panel shows the result of the realization that the capital stock is very large and greater than the desired level?

Use the following to answer questions . Exhibit: Investment and Production Possibilities -(Exhibit: Investment and Production Possibilities) A movement from point s to point t on curve B is likely to cause the economy to shift from

Use the following to answer questions . Exhibit: Investment and Production Possibilities -(Exhibit: Investment and Production Possibilities) Given that the economy is on curve B, it is most likely to achieve curve C or beyond if it allocates resources to produce at

Use the following to answer questions . Exhibit: Investment Projects -(Exhibit: Investment Projects) If the market interest rate declines from 15% to 13%, what happens to the quantity of investment demanded?

Which of the following is a component of investment?

Which of the following is classified as spending on investment? I. new residential construction II. business spending on new equipment III. business spending on structures such as office buildings IV. purchase of government bonds

The reduction of a firm's tax liability by a fraction of its investment during a period is a(n)

Use the following to answer questions . Exhibit: Aggregate Demand and Investment 2 -(Exhibit: Aggregate Demand and Investment 2) The economy is in short-run equilibrium. If policymakers want to use monetary policy to improve economic performance, they should

Net investment adds to the nation's capital stock.

Use the following to answer questions . Exhibit: Investment Demand -(Exhibit: Investment Demand) Which panel shows the result of a lower interest rate?

Which of the following will shift the investment demand curve to the right?

An increase in the interest rate causes a decrease in investment by shifting the investment demand curve to the left.

Use the following to answer questions . Exhibit: The Economy's Investment Demand Schedule -(Exhibit: The Economy's Investment Demand Schedule) If the interest rate falls from 20% to 15%, what is the change in the amount of investment?

During the Great Depression, capital stock in the United States was reduced since

If gross private domestic investment exceeds depreciation, then

Use the following to answer questions . Exhibit: Money and Investment -(Exhibit: Money and Investment) If the money supply is decreased in Panel (a) from MS1 to MS2, then in Panel (b),

Which of the following is the largest and fastest growing component of gross private domestic investment in the United States between 1995 and 2011?

An increase in interest rate will cause a(n)

Economics: the Study of Choice

Demand and Supply

Applications of Supply and Demand

Macroeconomics: the Big Picture

Measuring Total Output and Income

Aggregate Demand and Aggregate Supply

Economic Growth

The Nature and Creation of Money

Financial Markets and the Economy

Monetary Policy and the Fed

Government and Fiscal Policy

Consumption and the Aggregate Expenditures Model

Net Exports and International Finance

Inflation and Unemployment

A Brief History of Macroeconomic Thought and Policy

Inequality, Poverty, and Discrimination

Filters

Use the following to answer questions . Exhibit: Money and Investment -(Exhibit: Money and Investment) If the money supply is decreased in Panel (a) from MS₁ to MS₂, then in Panel (b),