Describe the relationship between investment and the level of disposable income.
What will be an ideal response?
Investment is autonomous with respect to disposable income. That is, the level of disposable income does not determine investment, but the level of the interest rate does. A decrease in the interest rate increases autonomous investment and an increase in the interest rate decreases autonomous investment.
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Although all points on the production possibilities frontier are efficient, that alone does not determine which point is “best” for the society.
Answer the following statement true (T) or false (F)
Nancy owns and operates a drug store that generates total revenues worth $30 million in a particular year. Her accounting costs for the year are $25 million. She could have earned $3 million in this year, if she had worked as a consultant for a pharmaceutical firm. Further, she could have earned 5 percent interest on $40 million of her own money that she invests in the business this year. Nancy's
accounting profit in this year is _____ and her economic profit is _____. a. $5 million; zero b. $5 million; $3 million c. $5 million; $8 million d. zero; $3 million e. $3 million; $43 million
Most markets in the U.S. economy are perfectly competitive
Indicate whether the statement is true or false
Which of the following will NOT be included in a bank's liability?
A) Short-term borrowing by the bank B) Demand deposits held with the bank C) Cash equivalents of the bank D) Long-term debt of the bank