Chapter 1. Chapter 8c (19c)

Step 1

Solved Problems
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You must read each slide, and complete any questions on the slide, in sequence.

Question

Consider the following graph, which depicts the relationship between a country’s income (Y) and its level of investment (I).

The graph depicts a straight horizontal line. The horizontal axis is labeled Y, or income, and the vertical axis is labeled I, or investment.

Here, investment and income have a(n) 33OwW5Sk7g0+R9g1fIFRWJ4KRDeVmZ1Do9mmkyHBLGr0KVpR relationship because as Income increases, Investment WxeGS26pnm4BBMA7PeyL+IhJImCogf1DsZyhUrhZiqjtXUuyBMrFvA==.

Here, investment depends on other factors, including investor confidence and interest rates. The horizontal line is indicative of an independent relationship.
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Step 2

Question

The graph depicts a straight horizontal line. The horizontal axis is labeled Y, or income, and the vertical axis is labeled I, or investment.

Suppose that businesses become less confident about the country’s future. In this case, the investment curve MTocgIiMVUq809UOnbW01dgXayIxt4UkYPB5l/MThMio1jHwwaGo7Ao5hl2kKhaeSlxNqA==.

Reduced expected income makes investors less willing to commit to long-term spending. This reduces investment.
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Step 3

Question

The graph depicts a straight horizontal line. The horizontal axis is labeled Y, or income, and the vertical axis is labeled I, or investment.

Suppose that capital suddenly becomes more productive. In this case, the investment curve Hy2T7/JD5Klc7Xz8rtaMHyGZzsfEUIHMi3ZeL335rfkINw3iLztY1hQFpV4AxegSmu4lDg==.

Higher productivity means capital is a better investment. Investors want to purchase more of this capital; this increases investment.
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