--%>
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 Cash Basis of Accounting Cash

    Cash Basis of Accounting: The base of accounting in which expenditures and revenues are recorded whenever cash is received or distributed.

    		•
  • Q : Define Referendum Referendum: This is

    Referendum: This is the power of the electors to support or reject statutes or parts of statutes, with particular exceptions and meeting particular deadlines and number of voter’s signatures.

    		•
  • Q : Describe the effect of stock dividends

    Describe the effect of stock (not cash) dividends and stock splits onto the market price of common stock? Why do corporations state stock splits and stock dividends? Stock splits & stock dividends decrease the price per share of the common

    		•
  • Q : Have mergers influenced competition

    Have mergers influenced competition?Federal Reserve data illustrates that measured on the local level, where competition takes place; markets have in fact experienced more banking competition, not less, in the past decade.

    		•
  • Q : Present value influenced by change in

    Normal 0 false false

  • Q : Define COBCP COBCP : Capital outlay

    COBCP: Capital outlay budgets are zero-based each and every year, thus, the department should submit a written capital outlay budget modify proposal for each fresh project or following phase of an existing project for which the department needs fundin

    		•
  • Q : Reimbursement Warrant or Revenue

    Reimbursement Warrant (or Revenue Anticipation Warrant): A warrant which has been sold by the State Controller’s Office, as an outcome of a cash shortage in th

    		•
  • Q : What is the schedule of Federal Funds

    What is the schedule of Federal Funds and Reimbursements, Supplementary: The supplemental schedule proposed by departments throughout budget preparation that exhibits the federal receipts and reimbursements through source.

    		•
  • Q : What is the cost of equity Intermediate

    Intermediate Finance   Always leave 4 decimals in the ($) numbers in your calculations (e.g. PMT = $10.8924) and, particularly, 6 decimals for interest rates (e.g. r = 0.078643 or 7.8643%). QUESTION 1:?Conlins Manufactu

    		•
  • Q : Nominal GDP and suitable price index

    Normal 0 false false