--%>
Assignment Help - homework help

Equilibrium level of aggregate investment

Suppose there are no investment projects in the economy that yield an expected rate of return of 25 % or more.  However assume there are $10 billion of investment projects yielding expected rate of return of among 20 and 25 percent; another $10 billion yielding among 15 and 20 percent; another $10 billion among 10 and 15 percent; & so forth.  Cumulate these data and graphically present them, putting the expected rate of overall return on the vertical axis and the amount of investment on the horizontal axis.  Describe the equilibrium level of aggregate investment if the real interest rate is (a) 15 percent, (b) 10 percent, and (c) 5 percent?  Describe why this curve is the investment demand curve.

 

 

E

Expert

Verified

See the below graph.  Aggregate investment:  (a) $20 billion; (b) $30 billion; (c) $40 billion.  This is the investment-demand curve since we have applied the rule of undertaking all investment up to the point where the expected rate of return, r, equivalent the interest rate, i.

 

789_equilibrium level of aggregate investment.png

   Related Questions in Finance Basics

  • Q : Explain Continuously Vacant Positions

    Continuously Vacant Positions: On July 1, the positions which were continuously vacant for six successive monthly pay periods throughout the prior fiscal year are abolished by the State Controller's Office. The six successive monthly

    		•
  • Q : Causes and solution to international

    causes and solutions to international bank crisis

    		•
  • Q : Mascot Simulation Simulation with

    Simulation with Crystal Ball Provided Workbook: Mascot Simulation Relevant Readings:"Discounted Cash Flow Modeling" folder + Text

    		•
  • Q : Define Fiscal Impact Analysis Fiscal

    Fiscal Impact Analysis: Usually refers to a section of an analysis (example, bill analysis) which recognizes the costs and revenue impact of a proposal and, to the level possible, a particular numeric estimate for appropriate fiscal years.

    		•
  • Q : What is in store for banking

    What is in store for banking consolidation? Merger activity is a natural procedure by which companies make themselves more efficient and better capable to compete for customers. The banking industry is no exception

    		•
  • Q : Describe the role of a broker in

    Describe the role of a broker within security transactions? How are brokers compensated?Brokers handle orders to purchase or sell securities. Brokers are agents who work in support of an investor. While investors call with an order, brokers work

    		•
  • Q : Define the term Baseline Adjustment or

    Define the term Baseline Adjustment or  Baseline Budget: Baseline Adjustment: Also termed to as Workload Budget Adjustment.

    Q : Determine the new per unit cost of

    Normal 0 false false

  • Q : How does the market find out the fair

    How does the market find out the fair value of a bond?The fair value of bond is the present value of the bond's coupon interest payments plus the present value of the face value payment at maturity, discounted at the market's required rate of re

    		•
  • Q : What is Revenue Anticipation Notes

    Revenue Anticipation Notes (RANs): The cash management tool usually used to remove cash flow imbalances in the General Fund in a given fiscal year. The RANs are not a budget deficit-financing tool.

    		•