Economis

NBS-1B4Y: Economics for Business

Seminar 8: Investment

Section A: multiple choice question 01) In economics “investment” refers to: a. Savings by households b. Money in shares c. Money spent on machinery d. Money in the bank 02) What does MEC stands for? a. The marginal efficiency of consumption b. The marginal effective consumption c. The marginal external capital d. The marginal efficiency of capital 03) Firms will invest up to the point where: a. The return on investment is zero b. The cost of borrowing is zero c. The return on investment equals the cost of borrowing d. The difference between the return on investment and the cost of borrowing is maximized 04) The accelerator shows the relationship between: a. Gross investment and output b. Net investment and consumption c. New investment and exports d. Net investment and the rate of change of output 05) An improvement in business expectations will: a. Lead to a movement along the MEC b. Increase interest rates c. Increase exports d. Shift the MEC outwards 06) The increase in national income relative to an initial increase in investment is measured by what? a. The accelerator b. The multiplier c. The coefficient d. The deflationary gap 07) If a consumer spends £80 out of an extra £200: a. The average propensity to consume is 0.8 b. The marginal propensity to consume is 0.4 c. The multiplier is 10 d. The deflationary gap is £120

NBS-1B4Y: Economics for Business

Seminar 8: Investment

Section B: true-false 08) Investment is a withdrawal from the circular flow. a. True b. False 09) According to the accelerator an increase in national income will automatically lead to an increase in net investment a. True b. False Section C: fill-in-blank 10) To find net investment from gross investment ____________ must be deducted.