20 Questions
Which type of investment expenditure is used in economic analysis and adds to the country's productive capacity?
Physical investment
What is the main source of capital spending in the circular flow of income?
Accumulated savings
Which type of investment expenditure involves the purchase of physical assets such as plant, machinery, and equipment?
Fixed investment
What is the role of investment expenditure in the economy?
It increases aggregate demand
Which type of investment expenditure only transfers the ownership of existing assets and is ignored in economic analysis?
Real/financial investment
Which sector is investment expenditure normally defined as consisting only of?
Private sector
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
Which of the following factors affects savings the most?
Price level
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
What is the relationship between interest rate and investment demand?
Inversely related
Which one of these is the correct definition of net investment?
Gross investment less replacement investment of capital consumption
Which one of these is the correct equation for calculating the multiplier?
$Y = I \times M$
According to the Acceleration Principle, what encourages businesses to invest?
Rapid rise of income and consumption spending
What is the main reason why a business invests?
Profits
Which one of these is the correct equation for calculating the increase in disposable income due to investment alone?
$Y = I \times M$
What does the Innovation theory by Joseph Schumpeter describe?
Introduction of unfamiliar product
Which one of these is the correct equation for calculating the new total consumption after investment?
$TY = C + C + I$
Which factor affects investment demand the least?
Profits
What is the relationship between price level and savings?
Inversely related
What is the effect of high taxes on savings?
Decrease in savings
Quiz: The Effect of Investment in Economic Development Test your knowledge on the impact of investment in economic development. Explore the principles, definitions, and sources of investment expenditure. Discover how capital spending derived from accumulated savings and external sources can contribute to the circular flow.
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