Investment Setting Quiz

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Questions and Answers

What is an investment?

Investment is the exchange rate between future consumption and present consumption.
Investment is people's willingness to pay the difference for borrowing today and their desire to receive a surplus on their savings. (correct)
Investment is the process of saving money instead of spending it.
Investment is the act of drawing on savings during retirement.

How do we measure the rate of return on an investment?

The rate of return is determined by individuals trading off present consumption for larger future consumption.
The rate of return is measured by the decline in investment rates in advanced economies since the global financial crisis.
The rate of return is measured by the steady increase in income growth in emerging market economies.
The pure rate of interest is determined by market forces. (correct)

Why do individuals invest?

Individuals invest by saving money instead of spending it.
Individuals invest to trade off present consumption for a larger future consumption. (correct)
Individuals invest due to a steady increase in income growth in emerging market economies.
Individuals invest due to a decline in investment rates in advanced economies since the global financial crisis.

How do investors measure risk related to investments?

<p>Investors measure risk through the demand for safe assets and increases in the riskiness of equity relative to bonds. (A)</p> Signup and view all the answers

What contributes to the decline in Real Rate of Return?

<p>A steady increase in income growth in emerging market economies during 2000–07 led to substantially higher saving rates in these economies. (A)</p> Signup and view all the answers