If Businesses Spend an Additional $150 Billion for Investment Projects

question 46

Multiple Choice

If businesses spend an additional $150 billion for investment projects in 2010, what will be the impact on national income (Y) if the multiplier is 2?

• A)Y will increase by $50 billion.
• B)Y will increase by $150 billion.
• C)Y will increase by $300 billion.
• D)Y will increase by $450 billion.

---

Definitions:

Diversify

Diversify refers to the strategy of spreading investments across various financial instruments, industries, and other categories to reduce exposure to risk.

Efficient Frontier

In portfolio theory, it represents the set of optimal portfolios that offer the highest expected return for a given level of risk or the lowest risk for a given level of expected return.

Risky Assets

Investments with a high degree of uncertainty in their returns, usually implying a greater potential reward.

Investment Opportunity Set

The array of all possible investment combinations available to an investor considering both risk and return.