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The Impact of Investment in Economic Development Quiz

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Questions and Answers

Which type of investment expenditure is used in economic analysis and adds to the country's productive capacity?

Inventory investment
Physical investment (correct)
Real/financial investment
Fixed investment

What is the main source of capital spending in the circular flow of income?

Circular flow
Current income
Accumulated savings (correct)
Consumption

Which type of investment expenditure involves the purchase of physical assets such as plant, machinery, and equipment?

Physical investment
Fixed investment (correct)
Real/financial investment
Inventory investment

What is the role of investment expenditure in the economy?

It increases aggregate demand (B) Signup and view all the answers

Which type of investment expenditure only transfers the ownership of existing assets and is ignored in economic analysis?

Real/financial investment (A) Signup and view all the answers

Which sector is investment expenditure normally defined as consisting only of?

Private sector (B) Signup and view all the answers

Which one of these is the correct definition of investment?

Spending on capital goods which are repeatedly used and gradually consumed over a long period of time (D) Signup and view all the answers

Which of the following factors affects savings the most?

Price level (B) Signup and view all the answers

Which one of these is the correct definition of gross investment?

The total amount of investment undertaken by an economy over a specified time period (D) Signup and view all the answers

What is the relationship between interest rate and investment demand?

Inversely related (A) Signup and view all the answers

Which one of these is the correct definition of net investment?

Gross investment less replacement investment of capital consumption (C) Signup and view all the answers

Which one of these is the correct equation for calculating the multiplier?

$Y = I \times M$ (B) Signup and view all the answers

According to the Acceleration Principle, what encourages businesses to invest?

Rapid rise of income and consumption spending (D) Signup and view all the answers

What is the main reason why a business invests?

Profits (A) Signup and view all the answers

Which one of these is the correct equation for calculating the increase in disposable income due to investment alone?

$Y = I \times M$ (B) Signup and view all the answers

What does the Innovation theory by Joseph Schumpeter describe?

Introduction of unfamiliar product (D) Signup and view all the answers

Which one of these is the correct equation for calculating the new total consumption after investment?

$TY = C + C + I$ (D) Signup and view all the answers

Which factor affects investment demand the least?

Profits (C) Signup and view all the answers

What is the relationship between price level and savings?