Exam 8: Basic Macroeconomic Relationships

Assume that for the entire business sector of the economy there is $0 worth of investment projects which will yield an expected rate of return of 25 percent or more. But there are $15 worth of investments which will yield an expected rate of return of 20-25 percent; another $15 with an expected rate of return of 15-20 percent; and similarly an additional $15 of investment projects in each successive rate of return range down to and including the 0-5 percent range. -Refer to the above information. If the real interest rate is 5 percent, what amount of investment will be undertaken?

As aggregate income decreases, the APC:

A decline in the real interest rate will:

In comparison with the consumption schedule, the investment schedule is:

If the real interest rate in the economy is i and the expected rate of return from additional investment is r, then other things equal:

Dissaving occurs where:

The simple multiplier:

Which of the following is the primary explanation for most of the fluctuations in output and employment over the course of the business cycle?