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- When economists say “investment,” they are referring to financial investments, which are purely financial transactions, such as swapping cash for a stock or a bond. Select one: a. True b. FalseExplain the determinants of investment. Include in your answer an explanation of how a change in each determinant affects investment.Derive the investment function (using the neoclassical model of investment). Explain how investment responds to changes in Marginal Product of Capital and interest rate.
- Investment spending in macroeconomics refers to: adding to productive capital and changes to inventory. adding to one's retirement account. buying stocks. buying newly issued shares of stock.Looking at business fixed investment, elaborate on why investment is negatively related to theinterest rates.b. Using the Tobin’s q theory, elaborate on the relationship between investment and capitalstock?c. If the market value of firm A is $1.5 million and the replacement cost of capital is $450,000, find the Tobin's q.d. Should the firm replace capital? Elaborate on your response.How will planned investment spending change as the following events occur? a) The interest rate falls as a result of Federal Reserve policy. b) The U.S. Environmental Protection Agency decrees that corporation must upgrade or replace their machinery in order to reduce their emissions of sulfur dioxide. c) Baby boomers begin to retire in large number and reduce their savings, resulting in higher interest rates. Thank you very much for your help.
- Discuss the lifecycle income hypothesis theory of consumption and explain its applicability in the Kenyan context.Marginal propensity to save is: A total saving divided by total income. B the change in total saving divided by the change in total income. C total saving when total income is zero. D total saving that is based on expected future income.Describe how the endogeneity versus exogeneity of consumption expenditures (i.e., the household sector) affects the size of predicted output multipliers by an input-output model.
- A rightward shift of the investment demand curve would be caused by a(an) a. increase in the expected rate of return on investment caused by an increase inbusiness confidence.b. decrease in the expected rate of return on investment caused by a decrease inbusiness confidence.c. increase in the rate of interest.d. decrease in the rate of interestThe following equations describe an economy: C= 10 + 0.5 Y (Consumption function) I = 190-20i (Investment function) Derive the equations for IS curve and represent it graphically for i=2 and i=52. What would be the impact of changing the determinant variables given in the first column (below) on investment? Factors affecting Investment Effect on Investment decrease in interest rate Increase in interest rate Increase in prices of capital goods There is no technology available in the country Demand for consumer goods decrease Government decided to increase corporation tax Increase in Subsidies