1. Suppose local governments throughout the United States increase their tax on business inventories. What would you expect to happen to U.S. investment? Why?
2. Suppose the government announces it will pay for half of any new investment undertaken by firms. How will this affect the investment demand curve?
3. Use the model of aggregate demand and aggregate supply to evaluate the argument that an increase in investment would raise the standard of living.
4. Suppose that every increase of $1 in real GDP automatically stimulates $0.20 in additional investment spending. How would this affect the multiplier?
5. If environmental resources were counted as part of the capital stock, how would a major forest fire affect net investment?
6. Use the information below to compute the levels of gross and net private domestic investment. Data are in billions of dollars.

Change in business inventories $ 59.3

Residential construction 369.6

Producers' durable equipment 691.3

Nonresidential structures 246.9

Depreciation 713.9