ZuoTi.Pro
Question

Please answer all the parts of the question including explanations and graphs where specified (Illustrate) 16....

Please answer all the parts of the question including explanations and graphs where specified (Illustrate)

16. A. Illustrate and discuss the effect on investment of a reduction in the interest rate (ceteris paribus).

B. Illustrate and discuss the effect on investment of more optimistic expectations about the future state of the economy

C.  Is it possible to have a reduction in the interest rate and a consequent reduction in investment? Illustrate and discuss

business   economics   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

a. Investment and interest rate are negatively related to each other. Interest rate is the cost of borrowing funds. Higher the rate of interest, lower will be the investment and vice versa with lower interest rate.

Interest rate Investment C D

b. When the economy is optimistic about the future expectations, the investors would expect higher returns and hence would be willing to invest more in the economy, the investment would increase, the investment curve would shift out to the right. Both the interest rate and the investment level would be higher.

Interest rate investment

c. Yes it is possible that there is a fall in both interest rate and investment. When the investment demand curve shifts inwards to the left, due to decrease in future expectations of the economy, decreased expected profits or withdrawl of tax credit by the government.

Interest rate Investment

0 0
Add a comment
Know the answer?
Add Answer to:
Please answer all the parts of the question including explanations and graphs where specified (Illustrate) 16....
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • In 2009, the U.S. economy was in a severe recession. The Federal Reserve had lowered the...

    In 2009, the U.S. economy was in a severe recession. The Federal Reserve had lowered the federal funds rate to about 0 percent, but still wanted to stimulate the economy more. The inflation rate in 2009 was about –1%, but households’ and businesses’ inflation expectations for the upcoming year were higher and positive, about 1.5%. a) First, do households’ and businesses’ investment demand depend on the ex ante or ex post real interest rate? Briefly explain why. b) Draw an...

  • Please make sure to answer all parts, previous expert answers have not and it's really confusing!!...

    Please make sure to answer all parts, previous expert answers have not and it's really confusing!! Closed Economy IS-LM-FE model. The behaviour of households and firms in a closed economy is represented by the following equations Y50N - 0.5N2 Cd 40 + 0.8Y d = 80-500r 0.5y-250(r + π*) where π-0.02 = _ where Y is output, N is labour, w is the real wage, Ns is the amount of labour supplied Cd is desired consumption. Id is desired investment....

  • Please answer all parts of this question (Especially the last two), Please make sure the answer i...

    Please answer all parts of this question (Especially the last two), Please make sure the answer is correct. Provide explanations if possible. Thankyou for your help !! Question 1 points How dd The surface figured, which is part of a right-circular cone, is called a frustrum. But it kind of looks like a fez frustrum fez If the radi of the top and bottom are r and R and the slant height is s (note lower case s), then the...

  • Please complete question 1, parts A,B, and C. Use formulas and graphs to answer the problems!...

    Please complete question 1, parts A,B, and C. Use formulas and graphs to answer the problems! Please show all work, and use the formulas for the equations. AutoSave OFF OF HW2P2 - Compatibility Mode - Saved to my Mac a Home Insert Draw Design Layout References Mailings Review View Tell me Share Comments Times New... v v 12 A A Aa A. 215 AakbCelld Ankl DdE A RICcDdE ABCDde AaBbCcDc Aabb Dee Heading 1 Normal Na Spacing Hercing 2 Title...

  • Question 3 [12 points] A simplified economy is specified as follows: A. Goods market, all values...

    Question 3 [12 points] A simplified economy is specified as follows: A. Goods market, all values C, I, G and NX values are in billions of C$: Consumption Expenditure: C = 100+ 0.5(Y-T) Investment Expenditure: 1 = 1,100 - 4,200i Government Expenditure: G = 460 Lump-sum Constant Taxes: T = 460 Exports: 70 Imports: 50 B. Money market, all md values are in billions of C$: Interest Rate: i = 0.03 or 3% Money Demand: Md = 1,400 - 19,200i...

  • Please answer question 1, parts A,B,C, and D+E if possible. Use formulas to express your solutions!...

    Please answer question 1, parts A,B,C, and D+E if possible. Use formulas to express your solutions! Be sure to show all work used in the problems including equations, and how you got to the solution. I need to understand the math behind the solution and how you got to the answer. Thank you! AutoSave OFF OF UA HW2P3 - Compatibility Mode a Home Insert Draw Design Layout References Mailings Review View Tell me Share Comments Times New... v v 12...

  • please conplete all parts to the question. i added some photos of answer choices to go...

    please conplete all parts to the question. i added some photos of answer choices to go by but not all of them 4. Analysis of a replacement project At times firms will need to decide if they want to continue to use their current equipment or replace the equipment with newer equipment. The company will need to do replacement analysis to determine which option is the best financial decision for the company. LORUSSO Co. is considering replacing an existing piece...

  • AND THE USE OF CALCULATORS SPREADSHEETS 2. PLEASE MAKE SURE TO WRITE Sttolal ANSWER EXPLANATIONS THAT...

    AND THE USE OF CALCULATORS SPREADSHEETS 2. PLEASE MAKE SURE TO WRITE Sttolal ANSWER EXPLANATIONS THAT ARE SUPPORTED BY YOUR CALCULATIONS WHEN ASKED IN A GINEN QUESTION 3. PLEASE USE EXCEL TO CALCULATE AND SHow WORKINGS. THANKS. 2 Industrial Grinders AWN 4 During the term, we had a case study, Industrial Grinders, which focused on Sunk and Opportunity Costs. 6 Please refer to the table below, which comes from data in the Industrial Grinders case Industrial Grinders 100 Steel Rings...

  • Please answer all parts of question number 3 and type them and bold or underline the...

    Please answer all parts of question number 3 and type them and bold or underline the correct answers Baker Mfg Inc. wishes to compare its inventory turnover to those of industry leaders, who have turnover of about 1313 times per year and 88 % of their assets invested in inventory.    Baker Mfg. Inc. Net Revenue $27 comma 50027,500 Cost of sales $19 comma 41019,410 Inventory $1 comma 2901,290 Total assets $17 comma 82017,820 a) What is Baker's inventory turnover?...

  • MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1)...

    MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The LM curve represents A) the single level of output where the goods market is in equilibrium. B) the combinations of output and the interest rate where the goods market is in equilibrium. C) the single level of output where financial markets are in equilibrium. D) the combinations of output and the interest rate where the money market is in equilibrium. E) none of...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT