Answer the question on the basis of the following information for a private closed economy.Assume that for the entire business sector of the economy there is $0 worth of investment projects that will yield an expected rate of return of 25 percent or more.But there are $15 worth of investments that 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 given 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) implies a direct (positive)relationship between the interest rate and the level of GDP.

Question

Quizplus · Accepted Answer

The expected rate of return curve represents the investment demand curve in the economy. It shows the relationship between the expected rate of return and the amount of investment that businesses are willing to undertake at different interest rates.

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