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?

    <p>It increases aggregate demand</p> Signup and view all the answers

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

    <p>Real/financial investment</p> Signup and view all the answers

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

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

    Which one of these is the correct definition of investment?

    <p>Spending on capital goods which are repeatedly used and gradually consumed over a long period of time</p> Signup and view all the answers

    Which of the following factors affects savings the most?

    <p>Price level</p> Signup and view all the answers

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

    <p>The total amount of investment undertaken by an economy over a specified time period</p> Signup and view all the answers

    What is the relationship between interest rate and investment demand?

    <p>Inversely related</p> Signup and view all the answers

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

    <p>Gross investment less replacement investment of capital consumption</p> Signup and view all the answers

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

    <p>$Y = I \times M$</p> Signup and view all the answers

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

    <p>Rapid rise of income and consumption spending</p> Signup and view all the answers

    What is the main reason why a business invests?

    <p>Profits</p> 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?

    <p>$Y = I \times M$</p> Signup and view all the answers

    What does the Innovation theory by Joseph Schumpeter describe?

    <p>Introduction of unfamiliar product</p> Signup and view all the answers

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

    <p>$TY = C + C + I$</p> Signup and view all the answers

    Which factor affects investment demand the least?

    <p>Profits</p> Signup and view all the answers

    What is the relationship between price level and savings?

    <p>Inversely related</p> Signup and view all the answers

    What is the effect of high taxes on savings?

    <p>Decrease in savings</p> Signup and view all the answers

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