__________ fluctuates _________ the business cycle.

Gross investment minus depreciation; with
Net investment; counter to
Gross investment minus net investment; with
Depreciation; counter to

An assembly line costs $100 million and has a life of one year. The cost of material and workers' wages for the year will be $15 million. The firm expects to sell the goods produced for $125 million. It pays the firm to invest in the new assembly line if the real interest rate is ____________________.

equal to the world real interest rate
no more than 25 percent a year
less than 10 percent a year
less than 13 percent a year

In the world economy, if private saving increases, government saving decreases, and the expected profit rate decreases, then the real interest rate __________________.

will remain unchanged
will decrease
might increase; decrease; or remain unchanged
will increase

If disposable income increases, the saving supply will _______ and if new technology is used, the investment demand will _______. As a result, the real interest rate __________.

decrease; increase; rise
increase; decrease; fall
increase; increase; might rise, fall, or stay the same
increase; increase; rise

The real interest rate will increase if all of the following events occur, other things remaining the same, except ______________________.

new technology increases the world investment demand
the world saving supply around the world decreases
the supply of private saving around the world increases
the world investment demand increases

Initially, world governments have a balanced budget. A world war ensues and results in the world government budget going into deficit. If crowding-out occurs, there will be a _______ the world investment demand curve and the world real interest rate will _______.

leftward shift of; decrease
rightward shift of; increase
movement up; increase
movement down; decrease

The direct effect of a decrease in budget deficits around the world is _________________.

no change in saving supply, the real interest rate, or investment
no change in the economic growth rate
an increase in saving supply and a fall in the real interest rate
an increase in investment and a rise in the real interest rate

When world government budget deficits increase, crowding-out will not occur if ________________ the change in government saving and the real interest rate ______________.

investment demand changes by less than; rises
investment demand changes to offset; does not change
private saving changes to offset; does not change
private saving changes by less than; falls

The table shows the saving supply and investment demand of the open economy of Omega. The real interest rate is 6 percent a year. If the economy goes into an expansion and investment increases by $2 billion, net exports will __________________.

not change
increase from -$5 billion to $2 billion
decrease from $5 billion to $3 billion
increase from $5 billion to $8 billion

The table shows the saving supply and investment demand of the open economy of Omega. If the world real interest rate is 4 percent a year and Omega increases it saving by $5 billion, Omega's international _________ to _____________.

borrowing increases; $20 billion
borrowing decreases; $10 billion
lending increases; $20 billion
lending decreases; $10 billion

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