Homework Answers
At 15%, aggregate investment = 20 billion
At 10%, aggregate investment = 30 billion
At 5%, aggregate investment = 40 Billion
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Assume there are no investment projects in the economy that yield an expected rate of return...
Assume there are no investment projects in the economy that yield an expected rate of return...
Assume there are no investment projects in the economy that
yield an expected rate of return of 25 percent or more. But suppose
there are $10 billion of investment projects yielding expected
returns of at least 20 percent; another $10 billion yielding at
least 15 percent; another $10 billion yielding at least 10 percent;
and so forth.
a. Draw this relationship between the expected rate of return and the amount of investment expenditure. Instructions: Use the tool provided 'ID' to...
Assume there are no investment projects that will produce an expected rate of return of 8...
Assume there are no investment projects that will produce an expected rate of return of 8 percent or more. There are, however, $2 billion worth of investment projects with an expected rate of return at 7 percent, an additional $2 billion for every drop of the interest rate by 1 percent. If the real interest rate is 3 percent in this economy, the cumulative amount of investment at the 3 percent or higher rate of return is: A. $10 billion...
Assume that for the entire business sector of the economy there is $5 worth of investment...
Assume that for the entire business sector of the economy there is $5 worth of investment projects which will yield an expected rate of return of 25 percent or more. But there are $7 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 $22 of investment projects in each successive rate of return range down to an including the 0-5...
Assume that for the entire business sector of the economy there is $0 worth of investment...
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 $7 worth of investments which will yield an expected rate of return of 20-25 percent; another $16 with an expected rate of return of 15-20 percent; and similarly an additional $23 of investment projects in each successive rate of return range down to an including the 0-5...
Draw a planned aggregate expenditure curve for an economy where autonomous expenditure is $200 billion and...
Draw a planned aggregate expenditure curve for an economy where autonomous expenditure is $200 billion and the marginal propensity to consume is equal to 0.50. Plot values for Actual Aggregate Expenditure' of $100, $200, $300, $400, $500, and $600. Instructions: Use the graphing tool to draw the planned aggregate expenditure curve by plotting points at each level of output (Y) starting with zero and ending with 500. Planned Aggregate Expenditure (PAE, billions of dollars) PAE = Y 500 Tools 450...
The aggregate investment demand curve is depicted in the graph below. Investment Demand Interest Rate (percent)...
The aggregate investment demand curve is depicted in the graph below. Investment Demand Interest Rate (percent) 10% ☺ => 1 2 3 4 5 6 7 8 Investment (thousands of dollars) Suppose the real interest rate is 6%. Draw the investment schedule that shows the relationship between the level of real GDP and investment Instructions: Use the tool provided I to plot only the endpoints such that the first point touches the vertical axis. Aggregate Expenditures Aggregate Expenditures (dollars) 10,000...
Investment demand and the market for money are shown in the graphs below. If the economy...
Investment demand and the market for money are shown in the graphs below. If the economy has a recessionary gap of $100 billion and the MPC is 0.8, what level of the money supply should the central bank target if it wants to bring real GDP back to the full- employment level? Demonstrate your answer graphically. Instructions: Use the tool provided 'Sm2' to draw the new money supply curve. Use the graph on the right to plot your line such...
6. Calculating Expected Return Based on the following information, calculate the expected return.
6. Calculating Expected Return Based on the following information, calculate the expected return. State of EconomyProbability of State of EconomyRate of Return if State OccursRecession.15-.12Normal.60.10Boom.25.277. Calculating Returns and Standard Deviations Based on the following information, calculate the expected returns and standard deviations for the two stocks. State of EconomyProbability of State of EconomyRate of Return if State OccursStock AStock BRecession.10.02-.30Normal.50.10.18Boom.40.15.3110. Returns and Standard Deviations Consider the following information: State of EconomyProbability of State of EconomyRate of Return if State OccursStock AStock BStock CBoom.15.33.45.33Good.55.11.10.17Poor.20.02.02-.05Bust.10-.12-.25-.09a. Your...
An investment is expected to generate an average return of 10% with a standard deviation of...
An investment is expected to generate an average return of 10% with a standard deviation of 5%. With 95% confidence level, the actual rate of return will fall between: A. -5% to 25%. B. -10% to 30%. C. 0% to 20%. D. 5% to 15%.
An investment is expected to generate an average return of 10% with standard deviation of 5%....
An investment is expected to generate an average return of 10% with standard deviation of 5%. With 95% confidence level, the actual rate of return will fall between: A. 0% to 20%. B. 5% to 15%. C. -10% to 30%. D. -5% to 25%.
Assume there are no investment projects in the economy that
yield an expected rate of return of 25 percent or more. But suppose
there are $10 billion of investment projects yielding expected
returns of at least 20 percent; another $10 billion yielding at
least 15 percent; another $10 billion yielding at least 10 percent;
and so forth.
a. Draw this relationship between the expected rate of return and the amount of investment expenditure. Instructions: Use the tool provided 'ID' to...
Assume that for the entire business sector of the economy there is $5 worth of investment projects which will yield an expected rate of return of 25 percent or more. But there are $7 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 $22 of investment projects in each successive rate of return range down to an including the 0-5...
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 $7 worth of investments which will yield an expected rate of return of 20-25 percent; another $16 with an expected rate of return of 15-20 percent; and similarly an additional $23 of investment projects in each successive rate of return range down to an including the 0-5...
Draw a planned aggregate expenditure curve for an economy where autonomous expenditure is $200 billion and the marginal propensity to consume is equal to 0.50. Plot values for Actual Aggregate Expenditure' of $100, $200, $300, $400, $500, and $600. Instructions: Use the graphing tool to draw the planned aggregate expenditure curve by plotting points at each level of output (Y) starting with zero and ending with 500. Planned Aggregate Expenditure (PAE, billions of dollars) PAE = Y 500 Tools 450...
The aggregate investment demand curve is depicted in the graph below. Investment Demand Interest Rate (percent) 10% ☺ => 1 2 3 4 5 6 7 8 Investment (thousands of dollars) Suppose the real interest rate is 6%. Draw the investment schedule that shows the relationship between the level of real GDP and investment Instructions: Use the tool provided I to plot only the endpoints such that the first point touches the vertical axis. Aggregate Expenditures Aggregate Expenditures (dollars) 10,000...
Investment demand and the market for money are shown in the graphs below. If the economy has a recessionary gap of $100 billion and the MPC is 0.8, what level of the money supply should the central bank target if it wants to bring real GDP back to the full- employment level? Demonstrate your answer graphically. Instructions: Use the tool provided 'Sm2' to draw the new money supply curve. Use the graph on the right to plot your line such...
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