Question 21The investment demand curve portrays an inverse (negative) relationship between:A. the level of investment spending and real GDP..B. the nominal interest rate and the level of investment spending..C. the real interest rate and the level of investment spending..D. the price level and the level of investment spending..Question 22Suppose that a new machine tool having a useful life of only one year costs $80,000. Suppose, also, that the net additional revenue resulting from buying this tool is expected to be $96,000. The expected rate of return on this tool is:A. 80 percent.B. 20 percent.C. 8 percent.D. 2 percent.Question 23A decline in the real interest rate will:A. shift the investment demand curve to the left.B. shift the investment demand curve to the right.C. increase the amount of investment spending.D. shift the investment schedule downward.Question 24The immediate determinants of investment spending are the:A. level of saving and the real interest rate.B. marginal propensity to consume and the real interest rate.C. interest rate and the expected price level.D. expected rate of return on capital goods and the real interest rateQuestion 25Other things equal, a 10 percent decrease in corporate income taxes will:A. shift the investment-demand curve to the right.B. have no effect on the location of the investment-demand curve.C. decrease the market price of real capital goods.D. shift the investment-demand curve to the left.Question 26The real interest rate is:A. the percentage increase in money that the lender receives on a loan.B. usually higher than the nominal interest rate.C. also called the after-tax interest rate.D. the percentage increase in purchasing power that the lender receives on a loan.Question 27If the nominal interest rate is 18 percent and the real interest rate is 6 percent, the inflation rate is:A. 12 percent.B. 24 percent.C. 6 percent.D. 18 percent.Question 28A high rate of inflation is likely to cause a:A. high nominal interest rate.B. decrease in nominal wages.C. low rate of growth of nominal GDP.D. low nominal interest rate.Question 29Investment spending in the United States tends to be unstable because:A. expected profits are highly variable.B. capital goods are durable.C. innovation occurs at an irregular pace.D. all of these contribute to the instability.Question 30The multiplier effect means that:A. a decline in the MPC can cause GDP to rise by several times that amount.B. a change in consumption can cause a larger increase in investment.C. an increase in investment can cause GDP to change by a larger amount.D. consumption is typically several times as large as saving.Question 31The multiplier is useful in determining the:A. full-employment unemployment rateB. level of business inventories.C. change in the rate of inflation from a change in the interest rate.D. change in GDP resulting from a change in spending.Question 32(Consider This) During the Great Recession of 2007-2009, both real interest rates and investment spending declined. This suggests that:A. the investment demand curve was positively sloped during this period.B. the investment demand curve shifted inward.C. firms were optimistic about future sales.D. purchases of capital from abroad increased, and these were not reflected in investment spending figures for that period.