Assume That for the Entire Business Sector of the Economy

question 133

Multiple Choice

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.If the real interest rate is 15 percent, what amount of investment will be undertaken?

• A)$15
• B)$30
• C)$45
• D)$60

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Definitions:

Economic Rent

The extra income earned by a resource over and above its opportunity cost, often due to natural advantages or market conditions.

Inelastic Demand Curve

Represents a situation where the demand for a product changes by a smaller percentage than changes in its price, indicating consumers' insensitivity to price changes.

Perfectly Elastic

A situation where the demand or supply for a product is infinitely responsive to changes in price, shown as a horizontal line on a graph.

Loanable Funds

A concept in economics that describes the market where savers supply funds for loans to borrowers.