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 at least 20 percent; another $10 billion yielding at least 15 percent; another $10 billion yielding at least 10 percent; and so forth.

a. Draw this relationship between the expected rate of return and the amount of investment expenditure.

Instructions: Use the tool provided 'ID' to plot the investment demand curve (plot 6 points total).

b. What will be the equilibrium level of aggregate investment if the real interest rate is as follows:

Instructions: Enter your answers as whole numbers.

15 percent:

10 percent:

5 percent:

30 Tools , 25 ID 20 Expected rate of return,r , percent 15 10 O 10 20 30 40 50 60 Investment (billions of dollars)