Use the Following Data to Answer the Questions

Question

Examlex · Accepted Answer

The Answer is (a) The investment demand schedule gives the amount of investment that would be undertaken at various rates of interest.The rate of interest that an investor would be willing to pay for any amount of investment will not exceed its expected rate of net profit.Therefore, the expected rate of profit determines the interest rate (or price) that investors would be willing to pay for various amounts of investment and this is the definition of an investment demand schedule.
(b) Investment is $90 billion.
(c) The inverse relationship stems from the equality of the expected rate of profit with the interest rate at each level of investment as explained in part (a).There are fewer types of investment that yield a large expected net profit and more and more investments that will yield a lower rate of return.Therefore, at high rates of interest there is a smaller amount of investment that will be undertaken because fewer investments yield an expected return high enough to cover the high interest rate.As the rate declines, more and more investments will yield enough return to cover the lower rates of interest.

Use the Following Data to Answer the Questions

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