Your firm has capital stock of $10 million and a depreciation rate of 10%. Gross investment is $3 million. How much is net investment?

Ans: Option A (1.5 million)

8.Holding other things constant, an invention that raises the future marginal product of capital (in a closed economy) would cause the investment curve to shift to the _____ and would cause the real interest rate to ______

Ans: Option B (right, increase)

Desired investment is the planned investment.Increase in desired investment will shift the investment curve to the Right.When investment will shift to right, real interest rates will increase.

9.If the stock market booms and people feel wealthier (in a closed economy), holding other things constant, then the real interest rate ______ and investment ________

Ans: Option B (rises, declines)

The economy booms and wealth increases which means the value of asset increases in real terms so the real interest rate increases but the people start spending more because of their wealthier nature so the investment decreases.

10.Which of the following statements about M1 and M2 is true?

Ans: Option A (.Money market mutual fund shares are not part of M1)