In the simple macro model,desired investment is assumed to be autonomous with respect to national income.Which of the following will cause a shift of the investment function?
1)a decrease in interest rates
2)an increase in firms' optimism about the economy
3)an expectation of a downturn in future economic activity
A)1 and 2
B)2 and 3
C)1 and 3
D)1,2,and 3
E)1 only

Question

Quizplus · Accepted Answer

A decrease in interest rates, an increase in firms' optimism, and an expectation of a downturn in future economic activity can all cause shifts in the investment function, as they affect the level of desired investment independently of national income.

In the Simple Macro Model,desired Investment Is Assumed to Be