Assume that for the entire business sector of the economy there is $0 worth of investment projects which will yield an expected rate of return of 25 percent or more.But there are $15 worth of investments which will yield an expected rate of return of 20-25 percent; another $15 with an expected rate of return of 15-20 percent; and similarly an additional $15 of investment projects in each successive rate of return range down to and including the 0-5 percent range.Refer to the above information.The expected rate of return curve:
A)shows a direct relationship between the interest rate and investment.
B)is also the investment-demand curve.
C)is indeterminate.
D)cannot be calculated without knowing the level of saving.

Question

Quizplus · Accepted Answer

The expected rate of return curve represents the investment-demand curve, showing the various levels of investment at different expected rates of return. It does not necessarily show a direct relationship between interest rates and investment, nor can it be calculated with information about saving levels.

Assume That for the Entire Business Sector of the Economy