Question

attempts 0.5 keep the highest 0.5/2

1. the investment demand curve

the following table shows the expected rate of profit and the cumulative amount of investment with that rate of profit or higher in a hypothetical economy. for example, $60 billion worth of investment projects have an expected rate of profit that is greater than or equal to 9%. put another way, at an interest rate of 9%, the amount of investment demanded equals $60 billion.

using the blue points (circle symbol), plot the hypothetical economys investment demand curve (i) on the graph. line segments will automatically connect the points.

determine how each of the following events will shift the investment demand (i) curve.

event number event

1. business executives becoming more optimistic about future sales, operating costs, and profits will cause the investment demand curve to shift to the
2. an decrease in business taxes will cause the investment demand curve to shift to the

Explanation:

• Event 1: When business executives are more optimistic about future sales, operating costs, and profits, they are more likely to invest. This increased willingness to invest at each interest rate causes the investment demand curve to shift to the right.
• Event 2: A decrease in business taxes means that after - tax profits are higher. Higher after - tax profits make investment more attractive. So, at each interest rate, the level of investment demanded is higher, leading to a right - ward shift of the investment demand curve.

Answer:

1. Right
2. Right