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, $100 billion worth of investment projects have an expected rate of profit that is greater than or equal to 8%. Put another way, at an interest rate of 8%, the amount of investment demanded equals $100 billion.

Expected Rate of Profit	Cumulative Investment at this Rate of Profit or Higher
(Percent)	(Billions of Dollars)
11	75
8	100
5	125
2	150

Sharon currently earns a wage of $12.00 per hour,' in other words, the amount of her paycheck each week is $12.00 per hour times the number of hours she works. Suppose the price of milk is $2.00 per gallon; in this case, Sharon's wage, in terms of the amount of milk she can buy with her paycheck, is gallons of milk per hour. When workers and Firms negotiate compensation packages, they haye expectations about the price leyel (and changes in the price leyelj and agree on a wage with those expectations in mind. If the price leyel turns out to be lower than expected, a worker's wage is than both the worker and employer expected when they agreed to the wage. Sharon and her employer both expected inflation to be 4% between 2012 and 2013, so they agreed, in a two-year contract, that she would earn $12.00 per hour in 2012 and $12.48 per hour in 2013. Howeyer, suppose inflation between 2012 and 2013 actually turned out to be 2%, not 4%. For example, suppose the price oF milk rose From $2.00 per gallon to $2.04 per gallon. This means that between 2012 and 2013, Sharon's nominal wage by , and her real wage by approximately Using the blue points (circle symbol), plot the hypothetical economy's investment demand curve (I) on the graph. Line segments will automatically connect the points. O Investment Function INTEREST RATE (Percent) 50 75 100 125 150 175 200 REAL INVESTMENT (Billions of dollars) 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 theO Consumption Function 35 30 25 REAL CONSUMPTION (Billions of dollars) 20 15 10 0 5 10 15 20 25 30 35 40 45 50 REAL DISPOSABLE INCOME (Billions of dollars) Suppose now that country's national income increases to $35 billion. Assuming the amount paid in taxes is fixed at $12 billion and MPC = 0.7, what will be the new household consumption? O $22.3 billion O $19.5 billion O $23.7 billion O $21.6 billionThe following graphs show an economy's initial position at point A along its consumption function ((). Suppose there is a stock market crash that wipes out a third of households' net wealth. On the graph, shift either the consumption carve or the initial point on the consumption function to show the impact of a decline in households' net wealth. (Note: In the scenario where the curve shifts, only shift the curve and do not adjust the position of the point.) C A REAL CONSUMPTION (Billions of dollars) REAL DISPOSABLE INCOME (Billions of dollars)Now suppose that disposable income suddenly and unexpectedly decreases, On the following graph, shift either the consumption curve or the initial point on the consumption function to show the impact of a fall in disposable income. (Note: In the scenario where the curve shifts, only shift the curve and do not adjust the position of the point.) O C C O A REAL CONSUMPTION (Billions of dollars) REAL DISPOSABLE INCOME (Billions of dollars)