Introduction to Economics 2 Deneme Sınavı Sorusu #349567
According to below chart, which assumption is made regarding the investment expenditures (I)?
Investment expenditures are not affected by income
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Investment expenditures are not affected by interest rate
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Investment expenditures are not affected by technological improvements
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Investment expenditures are not affected by capacity utilization |
Investment expenditures are constant |
When examining the determination of national income in an economy, we will assume that the investments are autonomous to simplify the analysis, i.e. independent of the current income level. However, this does not mean that we assume that investments are fixed at a certain level. There are a number of factors that cause investment spending to change. We assume that GDP is not one of these factors. In this case, we can draw autonomous investment expenditures parallel to the horizontal axis. This means that if the income increases or decreases, the autonomous investment expenditures will not be affected. In the figure, the investment function (line I) shows that investments at each income level are equal to fixed quantity.
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