The graph above indicates that: A) I'_g is an investment schedule that assumes that the investment plans of business are independent of the current level of income, whereas I_g does not B) I_g is an investment schedule that assumes that the investment plans of business are independent of the current level of income, whereas I'_g does not C) The equilibrium level of investment is determined at the point where investment schedule I'_g crosses the I_g investment schedule D) Investment schedule I'_g shows the inverse relationship between real domestic product and investment

Question

Quizplus · Accepted Answer

The graph depicts two investment schedules, I_g and I'_g. I_g is a conventional investment schedule where investment plans of businesses are assumed to be independent of the current level of income. On the other hand, I'_g takes into account the possibility that investment plans of businesses may depend on current income levels. The equilibrium investment level is determined by the intersection of the two schedules. Therefore, option B is correct, and the other options are incorrect.

The Graph Above Indicates That