SOLVED

11) Fixed investment is typically ________. A) smaller than inventory investment B) calculated as the change in holdings of raw materials and finished goods C) planned spending on equipment, structures, and new residential housing D) all of the above E) none of the above 12) Planned investment spending ________. A) is equal to planned fix investment spending plus the amount of inventory investment planned by firms B) is closely related to the real interest rate C) is heavily influenced by expectations about the future D) all of the above E) none of the above 13) Planned investment spending ________. A) is equal to planned fixed investment spending plus government investment B) is unrelated to the real interest rate C) is heavily influenced by expectations about the future D) all of the above E) none of the above 14) Investment spending ________. A) is comprised of fixed and inventory investment B) is negatively related to the real interest rate C) is heavily influenced by what Keynes coined as “animal spirits” D) all of the above E) none of the above 15) When the U.S. real interest rate falls ________. A) U.S. dollar assets earn a higher return relative to foreign assets B) it makes U.S. exports more expensive in foreign currencies C) imports will decrease D) all of the above E) none of the above 16) When the U.S. real interest rate rises ________. A) U.S. dollar assets earn a lower return relative to foreign assets B) makes U.S. exports more expensive in foreign currencies C) imports will decrease D) all of the above E) none of the above 17) When the U.S. real interest rate rises ________. A) U.S. dollar assets earn a higher return relative to foreign assets B) makes U.S. exports cheaper in foreign currencies C) imports will decrease D) all of the above E) none of the above 18) Net exports ________. A) are heavily determined by foreign demand for domestic goods B) are heavily determined by domestic demand for domestic goods C) are independent of domestic interest rate fluctuations D) all of the above E) none of the above 19) Planned expenditures ________. A) are directly affected by government purchases B) increase when there is a reduction in taxes C) decrease when disposable income decreases D) all of the above E) none of the above 20) What is the meaning of “animal spirits”? How do these relate to planned investment spending and to unplanned investment spending? 21) The investment function implies that current output does not influence investment. Does that make sense? 22) Acme Brands invested $5 million in 2010 on new equipment, spent $750 thousand to increase its inventory of intermediate components, and added $25 thousand to its inventory of finished goods. At year’s end, the components inventory is found to be $200 thousand above its beginning-of-the- year level, and finished goods inventory is up $30 thousand over its starting level. Calculate planned investment, unplanned investment, and actual (total) investment.