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    ECON201 - S24 - Tutorial 6

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    elserry.com
    The document is a tutorial for an economics course covering chapters on consumption, investment, and open economy macroeconomics. It includes sample questions about investment spending, the relationship between interest rates and investment, and how changes in factors like taxes, profits, and interest rates affect the demand for investment. It also provides tables and questions about specific investment projects and calculating their profits at different interest rates. Additional questions cover open economy concepts like calculating equilibrium GDP and drawing aggregate and domestic demand curves for an economy.

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    ECON201 - S24 - Tutorial 6

    Uploaded by

    elserry.com
    9 views3 pages
    The document is a tutorial for an economics course covering chapters on consumption, investment, and open economy macroeconomics. It includes sample questions about investment spending, the relationship between interest rates and investment, and how changes in factors like taxes, profits, and interest rates affect the demand for investment. It also provides tables and questions about specific investment projects and calculating their profits at different interest rates. Additional questions cover open economy concepts like calculating equilibrium GDP and drawing aggregate and domestic demand curves for an economy.

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    ECON201_S24_Tutorial 6

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    The document is a tutorial for an economics course covering chapters on consumption, investment, and open economy macroeconomics. It includes sample questions about investment spending, the relationship between interest rates and investment, and how changes in factors like taxes, profits, and interest rates affect the demand for investment. It also provides tables and questions about specific investment projects and calculating their profits at different interest rates. Additional questions cover open economy concepts like calculating equilibrium GDP and drawing aggregate and domestic demand curves for an economy.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    9 views3 pages

    ECON201 - S24 - Tutorial 6

    Uploaded by

    elserry.com
    The document is a tutorial for an economics course covering chapters on consumption, investment, and open economy macroeconomics. It includes sample questions about investment spending, the relationship between interest rates and investment, and how changes in factors like taxes, profits, and interest rates affect the demand for investment. It also provides tables and questions about specific investment projects and calculating their profits at different interest rates. Additional questions cover open economy concepts like calculating equilibrium GDP and drawing aggregate and domestic demand curves for an economy.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 3

    ECON 201: Introduction to

    Macroeconomics
    Semester: Spring 2024

    Tutorial 6
    Chapter 21: Consumption and Investment – Cont’d
    Chapter 28: Open-economy Macroeconomics

    Question 1: Choose the correct answer:

    1. Investment spending does not include:


    a. purchases of new housing.
    b. purchases of new factories.
    c. additions to a firm’s inventory of finished goods.
    d. the issuing of new stock.
    e. All of the above are considered as part of investment.

    2. Investment decisions depend on:


    a. the level of output produced by the new investments
    b. the interest rates and taxes that influence the costs of the investment
    c. business expectations about the state of the economy
    d. all of the above
    e. (b) and (c) only.

    3. Which of the following best describes the relationship between interest rates and the level of
    investment spending?
    a. They are directly related to each other.
    b. They are inversely related to each other.
    c. They move together but in no discernible relationship.
    d. They are unrelated.
    e. None of the above.

    4. We would move along the demand-for-investment schedule to a new level of investment spending
    if:
    a. corporate profits taxes increased.
    b. the parliament passed an investment tax credit.
    c. business managers became more optimistic about the future.
    d. interest rates changed.
    e. all the above.

    1
    5. The difference between GDP and domestic expenditure is:
    a. net imports.
    b. exports minus imports.
    c. imports minus exports.
    d. saving.
    e. none of the above.

    6. When the exchange rate increases:


    a. imports bill tends to increase.
    b. exports bill tends to increase.
    c. the government budget deficit tends to decrease.
    d. the marginal propensity to import tends to decline.

    --------------------------------------------------------------------------------------------------------------------------

    Question 2:

    Table 2 shows the characteristics of four separate investment projects. Suppose that the annual
    cost of investment is based on market interest rates. Three different possible values of interest
    rates are given. Assume that the interest rate is the only cost of each investment

    Table 2
    Annual profit per L.E.1000
    project Total Annual i =3% 6% 15%
    investment revenue
    (millions) per L.E
    1000
    A L.E.10 L.E.1000
    B 6 250
    C 14 100
    D 5 50

    a. Calculate the annual profit per L.E. 1000 at the different interest rates
    b. Given these rates, will the firm ever not invest in project A? What about project B?
    c. Knowing that the firm’s total demand for investment is the total of all the investment
    projects that the firm is willing to fund at various interest rates, fill in the blanks in Table 3.

    Table 3
    Interest rate Demand for Investment
    3%
    6%
    15%

    2
    --------------------------------------------------------------------------------------------------------------------------

    Question 3:

    Consider the open economy defined in the following table.

    GDP C I G Ex Im
    1500 700 200 500 250 150
    1550 730 200 500 250 155
    1600 760 200 500 250 160
    1650 790 200 500 250 165
    1700 820 200 500 250 170

    a. Determine the equilibrium level of GDP for this open economy.


    b. Calculate the slopes of the aggregate demand and the domestic demand functions. Then,
    present them graphically with explanation.

    --------------------------------------------------------------------------------------------------------------------------

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