What is the difference between the investment demand curve and the investment schedule for the economy?
What will be an ideal response?
The investment demand curve shows the relationship between the real interest rate and the level of investment spending. The relationship is an inverse one the lower the interest rate, the greater the investment spending which means that the investment demand curve is down sloping. This curve can also be shifted by five factors that can change the expected rate of return on investment.
The investment decisions of individual firms can be aggregated to construct an investment schedule. It shows the amount business firms collectively intend to invest at each possible level of GDP. A simplifying assumption is also made that investment is independent of GDP, so the investment schedule is graphed as a horizontal line across the possible levels of real GDP.
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In perfect competition, why is a firm's marginal revenue curve also the demand curve for the firm's output?
What will be an ideal response?
The production possibilities curve demonstrates the basic economic principle that
a. economies are always efficient b. assuming full employment, supply will always determine demand c. assuming full employment, an economy is efficient only when the production of capital goods in a particular year is greater than the production of consumption goodsin that year d. assuming full employment, to produce more of any one thing, the economy must produce less of at least one other good e. the production of more consumption goods this year requires the production of morecapital goods this year
It's logical, it's a rule of thumb, it's an economic guideline: As long as MR < MC, and the firm responds by decreasing the quantity it produces,
a. profit will equal zero b. profit will increase c. profit will decrease d. profit will remain unchanged e. the firm will minimize loss
The law of demand
A. is only an assumption that cannot be tested. B. does not apply to scarce goods. C. only applies to necessities, not luxuries. D. is consistent with human behavior in the world.