PP_Slides_Class_9_Monday_February_11

PP_Slides_Class_9_Monday_February_11 - Good Afternoon!...

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Good Afternoon!! Class 9 Monday, February 11
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1. The level of investment will tend to rise if the capacity utilization rate is ___ and the interest rate is ____. a. rising rising b. rising falling c. falling rising d. falling falling
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2. Which statement is false? a. residential home building fluctuates considerably from year to year b. investment is the most volatile sector in our economy c. gross investment is larger than net investment d. inventory investment can be negative e. none is false
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1. Suppose you could invest $1 million in inventory, which you expect to be able to sell at $1,500,000. If you expect your total selling costs to be $200,000, your expected profit rate would be __ percent. a. 10 b. 20 c. 30 d. 40 e. 50
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1. A business person would most likely invest if the expected profit rate were ___ and the interest rate were ___ percent. a. 4 6 b. 8 8 c. 18 12 a. 12 18 e. 4 3
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I 1. is abbreviation for Investment 2. is Gross Investment 3. is most volatile component of GDP Gross Investment – Depreciation = Net Investment
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Inventory Investment (Additional Inventory) -inventory on Dec 31 – inventory on Jan 1 = additional inventory - was negative in recessions in 1975, 1980, 1982, 1991, and 2001 -most volatile component of Investment
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Inventory Investment 1960-2005 (bil 1987$)
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Investment is: expenditures on NEW plant NEW equipment ADDITIONAL inventory NEW residential housing
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Gross Investment, 2005 (bil $)
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Investment to an Economist does NOT mean your stocks, bonds, futures, real estate, etc. those are financial assets
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How do businesses finance their expenditures? they BORROW -from themselves retained earnings -from banks bank loans -from public issue stock ownership or equity issue bonds debt
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want to earn high rate of return investment want to finance by paying low rate of interest saving lend at high rate of interest
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This note was uploaded on 03/31/2008 for the course ECON 202 taught by Professor Amsler during the Spring '08 term at Michigan State University.

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PP_Slides_Class_9_Monday_February_11 - Good Afternoon!...

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