7. Assume there are no investment projects in the economy that yield an expected rate of return...

Question:

7. Assume there are no investment projects in the economy that yield an expected rate of return of 25 percent or more. But suppose there are $10 billion of investment projects yielding expected returns of between 20 and 25 percent; another $10 billion yielding between 15 and 20 percent; another $10 billion between 10 and 15 percent; and so forth. Cumulate these data and present them graphically, putting the expected rate of return (and the real interest rate) on the vertical axis and the amount of investment on the horizontal axis. What will be the equilibrium level of aggregate investment if the real interest rate is

(a) 15 percent,

(b) 10 percent, and

(c) 5 percent? LO10.3

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Macroeconomics

ISBN: 9781259915673

21st Edition

Authors: Campbell McConnell, Stanley Brue , Sean Flynn

Question Posted: