What is the primary distinction between financial investment and real investment?

Financial investment involves purchasing shares and securities, while real investment involves adding to capital equipment.

Financial investment adds to capital equipment, while real investment involves purchasing shares and securities.

Financial investment refers to investments in physical assets, while real investment refers to investments in financial assets.

Financial investment refers to investments in new factories and equipment, while real investment refers to investments in existing assets.

Induced investment is primarily influenced by:

Changes in the market interest rate.

Government policies and regulations.

Changes in the supply of money.

Autonomous investment is characterized by:

Being influenced by changes in income.

Being independent of the level of income.

Being directly influenced by demand fluctuations.

What does the Marginal Efficiency of Capital (MEC) represent?

The highest rate of return expected from an additional unit of capital asset over its cost.

The cost of producing a capital asset.

The difference between gross investment and net investment.

The total investment in the economy.

How is the Marginal Efficiency of Investment (MEI) related to the rate of interest?

The MEI is a fixed rate that is independent of the rate of interest.

The MEI and the rate of interest have an inverse relationship.

The MEI is always higher than the rate of interest.

The MEI is always lower than the rate of interest.

How does an increase in total purchasing affect the Marginal Efficiency of Investment (MEI)?

It makes the MEI curve less elastic.

It shifts the MEI curve to the left.

Which concept is based on a given supply price for capital, and which one is based on induced changes in this price?

MEC is based on a given supply price for capital, and MEI is based on induced changes.

MEC is based on induced changes in the supply price, and MEI is based on a given supply price.

Both MEC and MEI are based on induced changes in the supply price.

Both MEC and MEI are based on a given supply price for capital.

What does the Marginal Efficiency of Capital (MEC) determine?

The level of total purchasing in the economy.

The optimum capital stock in an economy at each level of interest rate.

The overall financial health of a firm.

The rate of interest set by the central bank.

Which of the following represents the relationship between the MEC and the rate of interest?

The MEC is always lower than the rate of interest.

The MEC and the rate of interest have an inverse relationship.

The MEC is a fixed rate independent of the rate of interest.

The MEC is always higher than the market rate of interest.

How does the increase in the existing capital stock affect the Marginal Efficiency of Capital (MEC)?

The MEC becomes equal to the rate of interest.

Investment Function Free MCQ Practice Test with Solutions

	Macro Economics 59 videos\|61 docs\|29 tests

	Macro Economics 59 videos\|61 docs\|29 tests

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