Deck 22: Influences on Aggregate Demand: Investment

Question 1

In economics "investment" refers to:

A) Savings by households
B) Money spent buying in shares
C) Money spent buying machinery
D) Money in the bank

Answer 1

C

Question 2

What does MEC stand for in relation to investment?

A) The marginal efficiency of consumption
B) The marginal effective consumption
C) The marginal external capital
D) The marginal efficiency of capital

Answer 2

D

Question 3

Firms will invest up to the point where:

A) The return on investment is zero.
B) The cost of borrowing is zero.
C) The return on investment equals the cost of borrowing.
D) The difference between the return on investment and the cost of borrowing is maximized.

Answer 3

C

Question 4

The accelerator shows the relationship between:

A) Gross investment and output
B) Net investment and consumption
C) New investment and exports
D) Net investment and the rate of change of output

Question 5

An improvement in business expectations will:

A) Lead to a movement along the MEC.
B) Increase interest rates.
C) Increase exports.
D) Shift the MEC outwards.

Question 6

The increase in national income relative to an initial increase in investment is measured by what?

A) The accelerator
B) The multiplier
C) The coefficient
D) The deflationary gap

Question 7

If a consumer spends £80 out of an extra £200:

A) The average propensity to consume is 0.8.
B) The marginal propensity to consume is 0.4.
C) The multiplier is 10.
D) The deflationary gap is £120.

Question 8

Investment is a withdrawal from the circular flow.

Question 9

According to the accelerator an increase in national income will automatically lead to an increase in net investment

Question 10

To find net investment from gross investment ____________ must be deducted.

Question 11

Which of the following is an example of working capital?

A) Factory
B) Stocks
C) Machinery
D) None of the above

Question 12

The total amount of investment in an economy in a given period is referred to as:

A) Current investment
B) Super investment
C) Gross investment
D) Fixed investment

Question 13

Which of the following is an opportunity cost of investment?

A) Lower current consumption
B) Increased depreciation
C) Higher future expected benefits
D) None of the above

Question 14

Fixed capital is capital that:

A) Has a fixed price.
B) Is used for a relatively long period of time.
C) Cannot be physically moved.
D) All of the above.