Consider the Market for Financial Capital in the Long Run

question 66

Multiple Choice

Consider the market for financial capital in the long run.The investment demand curve is downward sloping because

• A)an increase in the real interest rate leads to an increase in investment demand.
• B)all components of desired investment are negatively related to the real interest rate.
• C)all components of desired investment are positively related to the real interest rate.
• D)a decrease in the real interest rate reflects a higher opportunity cost to firms of using financial capital.
• E)an increase in the real interest rate reflects a lower opportunity cost to firms of using financial capital.

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Definitions:

Critical Value Approach

A method used in hypothesis testing where the value of the test statistic is compared to a critical value to decide whether to reject the null hypothesis.

Hypothesized Population

The theoretical or assumed characteristics of a population from which a sample is drawn for the purpose of hypothesis testing.

Standard Error

A statistical measure that describes the accuracy with which a sample distribution represents a population by quantifying the dispersion of sample means around the population mean.

Critical Value Approach

A method of statistical testing which involves comparing the calculated value of a test statistic to a critical value to decide whether or not to reject the null hypothesis.