--%>
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 : Define Federal Fiscal Year Federal

    Federal Fiscal Year (FFY): The twelve month accounting period of the federal government, starting on October 1 and ending the following September 30. For illustration, a reference to FFY 2013 means the period starting October 1, 2012 and ending at Sep

    		•
  • Q : Inflationary expenditure gap or

    Normal 0 false false

  • Q : Why do assets equal the sum of total

    Why do overall assets equal the sum of total liabilities and equity?  Describe.            Assets = Liabilities + EquityAssets are the items of value business owns. Liabilities ar

    		•
  • Q : Examples of high operating leverage

    Give two instances of types of companies likely to contain high operating leverage. Give examples. Long distance telephone companies & electricity generating companies are likely to contain operating leverage. These two kinds of companies

    		•
  • Q : Public finance can you do this

    can you do this homework? My state Taxes

    		•
  • Q : Biometrics in banking operations

    Biometrics is one kind of technology that can be used to control these kinds of fraudulent practices. May be it is the system which cannot completely stop the practices but yes at least it is the way which can reduce it to the barest minimum. The conv

    		•
  • Q : Describe compensating balances its need

    Describe compensating balances and why do banks needs them from some customers? Under what situation would banks be most likely to impose compensating balances? Compensating balances are funds that a bank needs a customer to maintain in a non-i

    		•
  • Q : Why accounting profits and cash flows

    Normal 0 false false

    		•
  • Q : Describe security Normal 0 false false

    Normal 0 false false

    		•
  • Q : Difference among proforma financial

    Describe difference among pro forma financial statements and a cash budget? Depict why pro forma financial statements are not utilized to forecast cash needs. Pro forma income statements deal along with revenues and expenses which are not alway

    		•