Every other thing equal, an increase in the risk of investment return would cause the IScurve toSelect one:a. shift down and to the leftb. remain unchangedO c. shift up and to the rightO d. remain unchanged if the risk is small.

IS curve: It refers to the combinations of the rate of interest rate and the output produced in the…

Every other thing equal, an increase in the risk of investment return would cause the IS curve to Select one: O a. shift down and to the left O b. remain unchanged O c. shift up and to the right O d. remain unchanged if the risk is small.

Every other thing equal, an increase in the risk of investment return would cause the IS curve to Select one: O a. shift down and to the left O b. remain unchanged O c. shift up and to the right O d. remain unchanged if the risk is small.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter17: Financial Markets

Section: Chapter Questions

Problem 5SCQ: Investors sometimes fear that a high-risk investment is especially likely to have low returns. Is...

See similar textbooks

Related questions

Q: Refer to the information provided in Table 8.6 below to answer the questions that follow. Table 8.6…

A: As per the given data, when there is fall of interest rate from 15% to 6%, it can be seen that at…

Q: 10. Which of the following purchases is most likely to be affected by changes in interest rates?…

A: Chnages in Interest Rates affect the consumers as it will affect their buying and consumption…

Q: In the long run, an increase in investment demand pushes the real interest rate, encourages…

A: In an economy, investment demand is the demand for capital or funds by the firms to make production…

Q: Which of the following pairs of independent variables would violate (or most likely violate)…

A: Answer - Multicollinearity:- It is the condition where one variable is linearly related with another…

Q: Large stock market gains shifts the consumption function higher. O True O False

A: Consumption is a function of income. It is positively related to income and slopes upward, implies…

Q: When real interest rates rise, consumption will shift: downward if income rises as well downward if…

A: Opportunity cost is defined as the benefits an individual, business, or investor forgoes when he/she…

Q: Using the substitution effect, with a higher interest rate a borrower will Select one: O a. increase…

A: "Since you have asked multiple questions, we will solve first question for you .. If you want any…

Q: Total Costfor producer= L(i+1)Total output = Q = 10L –L2Price of the output = $1L=Loan amountQ =…

A: Total Cost = L(1 + i) Total Output = 10L - L2 Price of Output (P) = 1

Q: Given the consumption function C = NIS 100 million + 0.75 (NIS 300 million), autonomous consumption…

A: In the Keynesian macroeconomic theory when the price level in the economy is assumed to be fixed…

Q: When the interest rate is high, planned investment is so output is SO Gelect one: Oa. high; low O b.…

A: Planned investment is the desired level of investment.

Q: What does Tobin's q tell us about what determines a firm's investment decision?According to the the…

A: \What Is the Q Ratio or Tobin's Q? The Q ratio, otherwise called Tobin's Q, approaches the market…

Q: By how much will Y* increase, if an increase in consumer confidence causes the consumption function…

A: Dear student, you have asked multiple questions in a single post. In such a case, I will be…

Q: Amount of change in consumption in 'All other rounds' is O A. $16 B. $20 C. $100 D. $80

A: The Marginal propensity to consumer tells us how much a person will consume (spend) as a part of the…

Q: If an economy is producing a level of output which is lower than the equilibrium level, planned…

A: Planned expenditure is the amount of expenditure than an economy plans to spend.

Q: Which of the following doesn't have increasing function? O a. Saving function O b. Consumption…

A: In economics, a function is said to be increasing when the value of independent variable increases,…

Q: Suppose that the initial dividend on a stock is $1. The interest rate is 3 percent and the growth…

A: The dividend discount model (DDM) is a mathematical technique for projecting the price of a…

Q: If a family's MPS is 0.2, it means that the family is: O a. Saving $0.2 O b. Saving 20 percent of…

A: In economics, disposable income refers to the income available with individuals after the payment of…

Q: 66. Consider the following consumption function C = 1100 + 0.6Yd What is autonomous consumption? O…

A: Autonomous consumption is being defined as the expenditures which the consumers must make even while…

Q: Assume that investment does NOT depend on the interest rate. A reduction in the money supply will…

A: When the investment does not depend on the interest rate, the money supply decreases, then there is…

Q: (a) Suppose that f is differentiable, positive and decreasing on [a, b] and has no critical points.…

A: Given, f is differntiable, positive and decreasing on [a, b] and has no critical pointsIf g(x)=∫αx…

Q: Assume consumption is represented by the following: C = $400 + 0.5Y. Also assume that planned…

A: Given information, Consumption: $400 + 0.5Y Investment: $100 To find: equilibrium level of income

Q: 60. If Eman received a $1,000 increase in disposable income and her marginal propensity to save is…

A: Disposable Income = $1000 MPS (or Marginal Propensity to Save) = 0.15 Since, MPC + MPS = 1,…

Q: What are profits? O total money taken in by a corporation O difference between revenues (the amount…

A: Stock price is defined as the minimum amount of money that an individual must contribute to become…

Q: Which of the following is correct? O D. When MP is rising MC is O B. When AP is rising MC is…

A: Marginal Cost: The marginal cost refers to the cost by which the total cost increases due to the…

Q: Related to the Economics in Practice on p. 156: According to the "paradox of thrift," as individuals…

Q: Question 20 $60 O $40 + * $20 + $50 100 150 200 Disposable Income(Y) -20 Refer to the diagram. The…

A: The average propensity to consume (APC) is a measure of how much money is spent instead of saved.…

Q: In 2020 consumption (Ci) for selected countries was as follows Jordan 2.5 billion $, USA 100.12 $…

A: In the data those components are fixed which do not change and variable components change. Data is…

Q: On a graph of a consumption function, what is the significance of the 45-degree line? O a. It…

A: Answer: a (It connects all points where desired consumption equals actual disposable income)…

Q: Let u(x1, x2) be a regular definite bend-down function (DKAB-RSQC). If μ(x1,x2) = ψ(u(x1,x2)) and…

Q: Let us represent consumption in the next period on the vertical axis and consumption this period on…

A: It is given that there are two periods present and future. Income for future period (Y2) is given on…

Q: Question 5 $60 $40- $20- $50 100 150 200 Disposable Income(Y) -20 Refer to the diagram. The average…

A: Disposable income is the sum of consumption and saving. Average propensity to consume is consumption…

Q: A consumer's consumption-utility function for a two period horizon is 0.5 U(cg.G) =c,G" ne…

A: Answer - "Thank you for submitting the question. But, we are authorized to solve only 3 sub parts…

Q: The random walk of consumption states that: A. consumption this year is not a good forecast of…

A: "Since you have asked multiple questions, we will solve first question for you .. If you want any…

Q: Suppose that Amazon decides to spend $10 million on a new distribution center. If the marginal…

A: To measure all the amount of goods and services produced at a given time in a country, gross…

Q: Consider the household model that you have seen in class but now assume that the household lives for…

A: When a household model talks about more than one period, an individual's consumption and savings…

Q: Which of the following is most likely to cause a rightward shift of the investment demand curve? O…

A: A rightward shift of the investment demand curve implies an increase in the demand for investment. A…

Q: The graph of the consumption function has consumption expenditure on the vertical axis and Select…

A: In 1936, the concept of consumption function was introduced by John Maynard Keynes. The consumption…

Q: Consider the problem of an individual that has Y dollars to spend on consuming over 7o periods. Let…

A: In period 1 : Budget Constraint : P1c1 + S1 = Y Where , S1 are savings , P1c1 is income spent on…

Q: Which of the following statements about the Prospect Theory is correct: O a. Prospect Theory relates…

A: The theory that depicts the way in choosing among various alternatives and estimation of the…

Q: Which of the following is correct? O D. When MP is rising MC is falling, and when MP is falling MC…

A: Marginal product: It is the extra unit of output that is produced due to the extra unit of input put…

Q: When there's an increase in the cost of electricity for operating firms' machines: O a. The…

A: Here, the electricity cost is a operating cost since it is use in the operations and production.…

Q: Chapter 17: The Theory of Investment Question: The work in process motive for holding inventories…

A: Work in process includes goods in inventory that are in the process of being completed. Option b is…

Q: If an economy is producing a level of output which is lower than the equilibrium level, planned…

A: If the economy is producing at an output that is lower than the planned output, then the planned…

Q: An increase in disposable income shifts Select one: O a. both the consumption and savings functions…

A: The disposable income refers to the income of the consumer which is left with the consumer after…

Question

Every other thing equal, an increase in the risk of investment return would cause the IS
curve to
Select one:
a. shift down and to the left
b. remain unchanged
O c. shift up and to the right
O d. remain unchanged if the risk is small.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step 3

VIEW

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

Investors sometimes fear that a high-risk investment is especially likely to have low returns. Is this fear true? Does a high risk mean the return must be low?
“Risk-averse investor will never assume risk” - would you agree? Justify your stand. Also, explain the components of return of investment.
(a) You hold a two period bond that pays a coupon C at the end of each period. The interest rate is expected to be i for each of these periods. What is the price of the bond today? (b) The interest rate changes to i' in the second period. Evaluate the rates of return (using algebra) when you sell the bond after one period in the case of the change being 1. anticipated 2. unanticipated.
Suppose a handbill publisher can buy a new duplicating machine for $ 500 and the duplicator has a 1-year life. The machine is expected to contribute $ 550 to the year's net revenue. Instructions: enter your anwer as a whole number. What is the expected rate of return? (in percentage) If the real interest rate at which funds can be borrowed to purchase the machine is 8 percent, will the publisher choose to invest in the machine? Will it invest in the machine if the real interest rate is 9 percent? if it is 11 percent?
Most investors would agree with the notion that they want to earn as much money on their investments as possible. a) List and explain the different investors that you may be aware of, and state and explain their investment objectives. b) For the investor groups/classes identified in (a) above, what possible constraints do they have to contend with or face in their investment decision making process. List and explain the investor constraints they face.
Jobu is thinking about borrowing $10,000 from Mike. He promises Mike cash flows (a stream of payments) of $5000 for the next three years. If Jobu’s cost of capital is 15%, what is the Net Present Value of the investment for Mike? Show your calculation clearly.
Suppose that there is a 45 percent change that George's coffee shop will make $10000 in profits in January and a 45 percent chance it will make 0 profits and a 10 percent chance that it will make -$1000 in profits (i.e., it will lose $1000). Calculate the coffee shop's expected profits
A farmer believes there is an equal chance that the next growing season will be abnormallyrainy. His expected return function has the formExpected return = 0.5lnYNR + 0.5lnYRwhere YNR and YR represent the farmer’s income in the states of “normal rain”and “rainy,” respectively.Suppose the farmer must choose between two crops that promise the following incomeprospects:Crop YNR YRMaize $14,000 $5,000Cotton $9,500 $7,500a) Which of the crops will he plant?b) Suppose the farmer can plant half his field with each crop. Would he choose to do so?Explain your result.c) What mix of Maize and Cotton would provide maximum expected utility to this farmer?d) Would Maize crop insurance, available to farmers who grow only Maize, which costs$2,000 and pays off $4,000 in the event of a rainy growing season, cause this farmer tochange what he plants?
(1) Do you think you currently have the disciplineneeded to control your spending in order to free upcash for regular investing? If not, what changes couldyou make? (2) If someone gave you a “hot tip” on astock, how would you go about researching theopportunity before making an investment decision?
How does IRR (internal rate of return rule) differentiate from NPV (net present value rule) when deciding profitable investments? Is there a specific rule preferred or do they tend to give the same answer? Thank you so much im trying to understand them better.
You are working as an investment consultant in a firm. You have been provided data for the past 7 years in the Table 4 as follows: Table 4: Investment Data Yr. Investment (Rs. Millions) Returns (Rs. Millions) 1 185 17 2 128 37 3 75 63 4 98 54 5 155 36 6 63 72 7 112 36 Assume your client plans to investment 30 million rupees. Based on this data will you recommend your client to invest. Why or why not? Your recommendations must be supported by complete workings including model(s), relationships between variables (correlations, coefficient of determinations) and graphical visualizations (such as scatter charts).
Amy is figuring out her budget for two periods, t∈1,2 . In each period, she has an income yt with y1=200 and y2=0 . ct denotes her consumption level at period t . Amy decides to spend half of her first period income immediately, so c1=100 , and invest the other half ( $100 ). Amy has two investment options. One option is to buy stocks from company B . Each share costs $1 at t=1 . At t=2, the stock price is uncertain. There is a 10 % chance the stock price increases to $4 per share, a 50 % chance the stock price increases to $2.25 per share, and a 40 % chance the company B goes bankrupt and the stock price falls to $0 per share. Amy's other option is to invest all $100 in a savings account. But at t=2 , there is also a random shock to the savings account. There is a 50 % chance the bank operates normally and the interest rate is r=44 % and a 50 % chance the interest rate falls to 0 (but Amy can still get her $100 principal back). 1. Assume without proof that at t=1 , she still consumes…