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Use the following to answer questions Exhibit: Aggregate Demand and Investment 2 Use the following to answer questions Exhibit: Aggregate Demand and Investment 2 -(Exhibit: Aggregate Demand and Investment 2) To eliminate the output gap, policy makers could conduct A) an open market sale to raise interest rates and reduce investment spending which will shift the aggregate demand curve to the left. B) an open market sale to lower interest rates and stimulate investment spending which will shift the short-run aggregate supply curve to the right. C) an open market purchase to raise interest rates and reduce investment spending which will shift the aggregate demand curve to the left. D) an open market purchase to lower interest rates and stimulate investment spending which will shift the short-run aggregate supply curve to the left. -(Exhibit: Aggregate Demand and Investment 2) To eliminate the output gap, policy makers could conduct


A) an open market sale to raise interest rates and reduce investment spending which will shift the aggregate demand curve to the left.
B) an open market sale to lower interest rates and stimulate investment spending which will shift the short-run aggregate supply curve to the right.
C) an open market purchase to raise interest rates and reduce investment spending which will shift the aggregate demand curve to the left.
D) an open market purchase to lower interest rates and stimulate investment spending which will shift the short-run aggregate supply curve to the left.

E) None of the above
F) All of the above

Correct Answer

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In the short run, the most important consequence of an increase in investment is a(n)


A) increase in the capital stock.
B) decrease in the capital stock.
C) increase in aggregate demand.
D) decrease in aggregate demand.

E) B) and C)
F) None of the above

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Use the following to answer questions Exhibit: Investment Demand Use the following to answer questions Exhibit: Investment Demand -(Exhibit: Investment Demand) Which panel represents a sharp decrease in taxes on profits earned by firms? A) Panel (a) B) Panel (b) C) Panel (c) , a movement from B to A D) Panel (c) , a movement from A to B -(Exhibit: Investment Demand) Which panel represents a sharp decrease in taxes on profits earned by firms?


A) Panel (a)
B) Panel (b)
C) Panel (c) , a movement from B to A
D) Panel (c) , a movement from A to B

E) C) and D)
F) A) and B)

Correct Answer

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Net private investment equals


A) gross private domestic investment plus depreciation.
B) gross private domestic investment minus business taxes.
C) gross private domestic investment minus depreciation.
D) gross private domestic investment minus inventories.

E) B) and C)
F) B) and D)

Correct Answer

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Use the following to answer questions Exhibit: Investment and Production Possibilities Use the following to answer questions Exhibit: Investment and Production Possibilities -In the United States, during part of the Great Depression, between 1931 and 1936 A) gross private domestic investment was negative. B) gross private domestic investment was positive. C) net private domestic investment was positive. D) net private domestic investment was negative. -In the United States, during part of the Great Depression, between 1931 and 1936


A) gross private domestic investment was negative.
B) gross private domestic investment was positive.
C) net private domestic investment was positive.
D) net private domestic investment was negative.

E) A) and D)
F) B) and C)

Correct Answer

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The reduction of a firm's tax liability by a fraction of its investment during a period is a(n)


A) investment tax credit.
B) balanced budget amendment.
C) capital gains tax.
D) real estate tax.

E) All of the above
F) A) and B)

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Use the following to answer questions Exhibit: Investment and Production Possibilities Use the following to answer questions Exhibit: Investment and Production Possibilities -(Exhibit: Investment and Production Possibilities) Given that the economy is on curve B, it is most likely to achieve curve C or beyond if it allocates resources to produce at A) point r. B) point s. C) point t. D) point u. -(Exhibit: Investment and Production Possibilities) Given that the economy is on curve B, it is most likely to achieve curve C or beyond if it allocates resources to produce at


A) point r.
B) point s.
C) point t.
D) point u.

E) A) and B)
F) A) and C)

Correct Answer

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Use the following to answer questions Exhibit: Investment and Production Possibilities Use the following to answer questions Exhibit: Investment and Production Possibilities -A decision to produce more investment goods and fewer consumption goods I.requires the sacrifice of current and future consumption. II.allows the production of more of both types of goods in the future. III.requires an increase in current savings. A) I, II, and III B) II and III only C) II only D) III only -A decision to produce more investment goods and fewer consumption goods I.requires the sacrifice of current and future consumption. II.allows the production of more of both types of goods in the future. III.requires an increase in current savings.


A) I, II, and III
B) II and III only
C) II only
D) III only

E) B) and D)
F) A) and C)

Correct Answer

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If the Fed wishes to reduce aggregate demand, it will conduct an open market


A) sale which will lower bond prices, lower interest rates, and stimulate investment.
B) purchase which will lower bond prices, lower interest rates, and discourage investment.
C) sale which will lower bond prices, raise interest rates, and discourage investment.
D) purchase which will raise bond prices, lower interest rates, and stimulate investment.

E) B) and C)
F) C) and D)

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All other things unchanged, an increase in taxes on profits earned by firms tends to


A) cause a movement down along the investment demand curve.
B) cause a movement up along the investment demand curve.
C) shift the investment demand curve to the right.
D) shift the investment demand curve to the left.

E) A) and B)
F) A) and C)

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Use the following to answer questions Exhibit: Investment Demand Use the following to answer questions Exhibit: Investment Demand -(Exhibit: Investment Demand) Which panel shows the result of a lower interest rate? A) Panel (a) B) Panel (b) C) Panel (c) , a movement from B to A D) Panel (c) , a movement from A to B -(Exhibit: Investment Demand) Which panel shows the result of a lower interest rate?


A) Panel (a)
B) Panel (b)
C) Panel (c) , a movement from B to A
D) Panel (c) , a movement from A to B

E) All of the above
F) C) and D)

Correct Answer

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Which of the following is included in gross private domestic investment? I.Macy's purchase of new computerized cash registers II.repairs to and replacements to the carpeting at Macy's III.your purchase of a new queen-sized mattress from Macy's IV.changes in Macy's business inventories


A) I only
B) I and II only
C) I, II, and IV only
D) I, II, III, and IV

E) A) and D)
F) B) and D)

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Use the following to answer questions Exhibit: Money and Investment Use the following to answer questions Exhibit: Money and Investment -There is a negative relationship between the quantity of investment demanded and the interest rate. -There is a negative relationship between the quantity of investment demanded and the interest rate.

A) True
B) False

Correct Answer

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Policies that deter investment such as an increase in the corporate profit tax rate,


A) will increase aggregate demand due to increased tax revenue, and eventually shift the long-run aggregate supply (LRAS) curve to the right of where it would have been.
B) will reduce aggregate demand, and eventually shift the LRAS curve to the left of where it would have been.
C) will initially increase aggregate demand due to increased tax revenue, but eventually shift the long-run aggregate supply (LRAS) curve to the left of where it would have been.
D) will initially reduce aggregate demand, but eventually shift the LRAS curve to the right of where it would have been as firms raise prices to compensate for the tax increase.

E) A) and B)
F) B) and D)

Correct Answer

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Use the following to answer questions Exhibit: Investment and Production Possibilities Use the following to answer questions Exhibit: Investment and Production Possibilities -During the Great Depression, capital stock in the United States was reduced since A) gross investment was negative. B) gross investment was above depreciation. C) gross investment was below depreciation. D) gross investment was equal to depreciation. -During the Great Depression, capital stock in the United States was reduced since


A) gross investment was negative.
B) gross investment was above depreciation.
C) gross investment was below depreciation.
D) gross investment was equal to depreciation.

E) A) and C)
F) None of the above

Correct Answer

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Which of the following is not a determinant of investment demand?


A) Expectations about future profitability
B) Changing consumers' tastes and preferences
C) The cost of labor, an alternative factor of production
D) Changes in the rate of corporate profit tax

E) B) and D)
F) A) and B)

Correct Answer

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Use the following to answer questions Exhibit: Money and Investment Use the following to answer questions Exhibit: Money and Investment -Expectations of an improving economy will generally cause an increase in investment by shifting the investment demand curve to the right. -Expectations of an improving economy will generally cause an increase in investment by shifting the investment demand curve to the right.

A) True
B) False

Correct Answer

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Which of the following is a component of investment?


A) A travel agency purchases new software to update its reservations process.
B) Karla buys an existing home in Oakland, California.
C) Sharon, a college student, purchases "MathType," a mathematical equation editing software.
D) Wen Kew buys a used delivery truck for his furniture business.

E) C) and D)
F) B) and D)

Correct Answer

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Use the following to answer questions Exhibit: Investment Demand Use the following to answer questions Exhibit: Investment Demand -(Exhibit: Investment Demand) Which panel represents the result of repealing a significant investment tax credit? A) Panel (a) B) Panel (b) C) Panel (c) , a movement from B to A D) Panel (c) , a movement from A to B -(Exhibit: Investment Demand) Which panel represents the result of repealing a significant investment tax credit?


A) Panel (a)
B) Panel (b)
C) Panel (c) , a movement from B to A
D) Panel (c) , a movement from A to B

E) A) and B)
F) A) and C)

Correct Answer

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Use the following to answer questions Exhibit: The Economy's Investment Demand Schedule Use the following to answer questions Exhibit: The Economy's Investment Demand Schedule -The purchase of a bond is A) not considered capital. B) equivalent to adding capital to a firm's capital stock. C) equivalent to undertaking investment. D) a more attractive form of investment (compared to capital) when interest rates are high. -The purchase of a bond is


A) not considered capital.
B) equivalent to adding capital to a firm's capital stock.
C) equivalent to undertaking investment.
D) a more attractive form of investment (compared to capital) when interest rates are high.

E) A) and C)
F) A) and B)

Correct Answer

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