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The following table shows the expected rate of prot and the cumulative amount of investment with that rate of prot or higher in a hypothetical
The following table shows the expected rate of prot and the cumulative amount of investment with that rate of prot or higher in a hypothetical economy. For example, $50 billion worth of investment projects have an expected rate of prot that is greater than or equal to 11%. Put another way, at an interest rate of 11%, the amount of investment demanded equals $50 billion. Expected Rate of Prot Cumulative Investment at this Rate of Prot or Higher (Percent) (Billions of Dollars) 1 5 25 1 1 50 7 7'5 3 1 0|] Using the blue points (circle symbol), plot the hypothetical economy's investment demand curve (I) on the graph. IJne segments will automatically connect the points. C?) .n.. mm -O- .- .5 Investment Function .5.- Nu .._t ad. INTEREST RATE (Percent) Mwnmmwmm I] I I I I I I I I D 25 5t] 75 100 125 15!] 1T5 20!] REAL INVESTMENT {Billions Of dollars) Determine how each of the following events will shift the investment demand {1) curve. Event Number Event 1. An increase in the rate of technological progress will cause the investment demand curve to shift to the V . 2. Business executives becoming more pessimistic about future sales, operating costs, and prots will cause the investment demand curve to shift to the V
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