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Gillespie: Foundations of Economics

Unit 25

Instructions

Choose your answers from a-d by clicking the radio button next to each choice and then press 'Submit' to get your score.

Question 1

An increase in investment is most likely to be caused by:

a) Lower interest rates

b) Lower national income

c) A decrease in the marginal propensity to consume

d) An increase in withdrawals

Question 2

An outward shift in the Marginal Efficiency of Capital should:

a) Decrease consumption

b) Increase aggregate demand

c) Reduce aggregate supply

d) Slow economic growth

Question 3

An increase in interest rates:

a) Is likely to reduce savings

b) Is likely to reduce the external value of the currency

c) Leads to a shift in the MEC schedule

d) Leads to a movement along the MEC schedule

Question 4

The accelerator assumes:

a) The marginal propensity to consume is constant

b) The economy is at full employment

c) There is a constant relationship between net investment and the rate of change of output

d) The multiplier is constant

Question 5

Investment depends mainly on:

a) Past levels of income

b) Future expected profits

c) Present national income levels

d) Historic data

Question 6

A profit maximising firm will invest up to the level of investment where:

a) The cost of borrowing equals the marginal efficiency of capital

b) The cost of borrowing is greater than the marginal efficiency of capital

c) The cost of borrowing is less than the marginal efficiency of capital

d) The cost of borrowing equals the marginal propensity to consume

Question 7

Investment is:

a) An injection that increases aggregate demand

b) A withdrawal that increases aggregate demand

c) An injection that decreases aggregate demand

d) A withdrawal that decreases aggregate demand

Question 8

Investment is an unstable element of aggregate demand because is depends heavily on:

a) Government policy

b) Expectations

c) National income

d) Historic trends

Question 9

If an increase in investment leads to a bigger increase in national income this is called the:

a) Accelerator

b) Aggregate demand

c) Monetarism

d) Multiplier

Question 10

The difference between gross investment and net investment is:

a) Depreciation

b) Acceleration

c) Deceleration

d) Capital investment

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