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 in this scenario represents the investment-demand curve, as it shows the relationship between the expected rate of return and the amount of investment in each rate of return range. The curve slopes downward, indicating that higher expected rates of return will result in more investment, while lower expected rates of return will result in less investment.

Assume That for the Entire Business Sector of the Economy