Question

all of the following will cause the planned investment function to shift except part 2 a. in the interest rate. b. in expected profits. c. in technology. d. in business taxation. part 3 and in the interest rate causes part 4 a. in the investment function. b. in the investment function. c. in the amount of real planned investment. d. in disposable income.

Answer 1

Changes in technology, expectations of near-term economic growth, and business taxation will shift the planned investment function, while an increase in interest rates will cause a decrease in the amount of real planned investment.

Step-by-step explanation:

The question refers to factors that cause a shift in the planned investment function. Let's address each part of the question:

• All of the following will cause the planned investment function to shift except changes in the interest rate. So, a change in technology (technological opportunities), expected profits (expectations about near-term economic growth), and business taxation can lead to shifts in the investment function.
• An increase in the interest rate typically leads to a decrease in the investment function because the cost of borrowing funds increases. Alternatively, a decrease in the interest rate can stimulate investment spending, as borrowing becomes cheaper.

Therefore, in part 3 and 4 of your question, an increase in the interest rate causes a decrease in the amount of real planned investment, as higher interest rates usually reduce investment spending.