--%>
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 Merit Salary Adjustment Merit

    Merit Salary Adjustment (MSA): The cost factor resultant from the periodic raise in salaries paid to the personnel occupying authorized positions. The personnel usually receive a salary raise of 5 percent per year up to the upper sala

    		•
  • Q : Why do analysts compute financial ratios

    Why do analysts compute financial ratios? Ratios are comparative measures.  Since the ratio illustrates relative value, they let financial analysts to compare information which could not be compared in its raw form.  For instance, rati

    		•
  • Q : Absolute and relative sizes of the

    Normal 0 false false

    		•
  • Q : Explain Proposed New Positions Proposed

    Proposed New Positions: It is a request for an authorization to use up funds to use additional people to execute work. Proposed new positions might be for limited time periods (that is, limited term) and for full or less than full tim

    		•
  • Q : Describe the notion of political

    Normal 0 false false

  • Q : Define Trigger Trigger : An event which

    Trigger: An event which causes an action or actions. The triggers can be active (like pressing the update key to validate input to a database) or passive (like a tickler file to repeat of an activity). For illustration, budget "trigger" mechanisms hav

    		•
  • Q : Domestic supply and demand diagram

    Normal 0 false false

    		•
  • Q : Explain Workload Budget Workload Budget

    Workload Budget: Workload Budget means the budget year cost of presently authorized services, adjusted for modifications in caseload, enrollment, population, statutory cost-of-living adjustments, one-time expenditures, chaptered legislation, full-year

    		•
  • Q : What is an Element Element : It is a

    Element: It is a subdivision of a budgetary program and the second stage of the program structure in the Uniform Codes Manual.

    		•
  • Q : Explain intermediation Explain

    Explain intermediation.The financial system makes it achievable for surplus and deficit economic units to come together, exchanging funds for securities, to their mutual profit. While funds flow from surplus economic units to a financial institu

    		•