Investment Function Chapter 7 Quiz
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Questions and Answers

What is the main focus of this chapter on investment?

  • The factors that facilitate or constrain investment's contribution to the circular flow
  • The relationship between savings and investment spending
  • The process of building up the capital stock and its impact on income and production (correct)
  • The distinction between physical and financial investment

    • What is the primary source of investment spending according to the passage?

  • Accumulated savings and other external sources (correct)
  • Ownership transfers of existing assets
  • Current income and consumption
  • The circular flow of income and production

    • What is the key distinction between physical investment and financial investment?

  • Physical investment is a capital expenditure, while financial investment is a current expenditure.
  • Physical investment involves the purchase of physical assets, while financial investment involves the purchase of financial assets.
  • Physical investment increases the country's productive capacity, while financial investment only transfers the ownership of existing assets. (correct)
  • Physical investment is derived from current income and consumption, while financial investment is derived from accumulated savings.

    • What is the purpose of discussing the relationship between demand and supply for investment?

    <p>To explore the interplay between investment factors and changes in the flow of income and production</p> Signup and view all the answers

    What is the primary focus of the chapter's discussion on savings?

    <p>How savings can be channeled back into the circular flow as a source of investment spending</p> Signup and view all the answers

    Which of the following best describes the overall structure of the chapter?

    <p>It starts with the definition of investment and then discusses the relationship between investment, savings, and the circular flow of income and production.</p> Signup and view all the answers

    Why is investment essential for an economy?

    <p>It increases the capital stock and generates income inflows</p> Signup and view all the answers

    What is the primary source of financing for investment?

    <p>Savings of the economy</p> Signup and view all the answers

    Which of the following is NOT considered part of investment expenditure in national income analysis?

    <p>Private sector investment spending</p> Signup and view all the answers

    What is the relationship between investment expenditure and aggregate demand?

    <p>Investment expenditure is a component of aggregate demand</p> Signup and view all the answers

    Which of the following statements about investment expenditure is NOT true?

    <p>It is financed solely by current business income</p> Signup and view all the answers

    What is the primary purpose of investment expenditure by the government?

    <p>To provide for social projects like roads, hospitals, and schools</p> Signup and view all the answers

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