Assume there are no prospective investment projects (I) which will yield an expected rate of return (r) of 25 percent or more, but that there are $5 billion of investment opportunities with an expected rate of return between 20 and 25 percent, an additional $5 billion between 15 and 20 percent, and so on. The investment-demand curve for this economy is:
A) Column A
B) Column B
C) Column C
D) Column D

Question

Assume there are no prospective investment projects (I) which will yield an expected rate of return (r) of 25 percent or more, but that there are $5 billion of investment opportunities with an expected rate of return between 20 and 25 percent, an additional $5 billion between 15 and 20 percent, and so on. The investment-demand curve for this economy is: 
A) Column A 
B) Column B 
C) Column C 
D) Column D

Quizplus · Accepted Answer

The highest rate of return available is 25%. Any investment with a lower expected rate of return will have a lower demand. Therefore, the demand for investment projects with expected rates of return between 20% and 25% ($5 billion) is greater than the demand for investment projects with expected rates of return between 15% and 20% ($5 billion). Column B reflects this relationship, as the quantity demanded decreases as the expected rate of return decreases.

Assume There Are No Prospective Investment Projects (I) Which Will