Assume there are no prospective investment projects (I) which will yield an expected rate of return (r) of 25 percent or more, but that there are $5 billion of investment opportunities with an expected rate of return between 20 and 25 percent, an additional $5 billion between 15 and 20 percent, and so on.The investment-demand curve for this economy is:
A)Column A
B)Column B
C)Column C
D)Column D

Question

Assume there are no prospective investment projects (I) which will yield an expected rate of return (r) of 25 percent or more, but that there are $5 billion of investment opportunities with an expected rate of return between 20 and 25 percent, an additional $5 billion between 15 and 20 percent, and so on.The investment-demand curve for this economy is: 
A)Column A 
B)Column B 
C)Column C 
D)Column D

Quizplus · Accepted Answer

Column B represents the total amount of investment projects with a rate of return between 20 and 25 percent, which is the highest return available in the economy. As there are no projects with an expected rate of return of 25 percent or more, pursuing investments with a lower expected rate of return will still provide a return that is higher than any other available investment. Therefore, the best choice is to invest in all $5 billion of available projects with an expected rate of return between 20 and 25 percent in Column B.

Assume There Are No Prospective Investment Projects (I) Which Will