Lesson 2.2.3
2.2.3 Investment (I) Quiz: Pearson Edexcel Economics, Unit 2
20 questions
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Lesson 2.2.3, Investment (I): 20 multiple choice questions for the Pearson Edexcel Economics (9EC0), Unit 2: Theme 2: The UK economy – performance and policies, written with Revision Ninja.
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The 20 questions
-
Total spending on capital goods before accounting for depreciation is called what?
- Gross investment
- Human capital
- Net investment
- Portfolio investment
-
How is net investment calculated from gross investment?
- Divided by depreciation
- Minus depreciation
- Plus depreciation
- Times depreciation
-
If gross investment is 200 billion and depreciation is 150 billion, what is net investment?
- -50 billion
- 200 billion
- 350 billion
- 50 billion
-
What happens to capital stock when gross investment is less than depreciation?
- It doubles
- It shrinks
- It stays constant
- It expands
-
Which economic concept explains how GDP growth stimulates firm investment?
- Multiplier effect
- Fisher effect
- Accelerator effect
- Crowding out effect
-
What term did Keynes use for business confidence driving investment?
- Creative destruction
- Invisible hand
- Moral hazard
- Animal spirits
-
How does a fall in interest rates affect planned business investment?
- Has no effect
- Decreases investment
- Increases investment
- Halts investment
-
What happens to business investment when commercial banks restrict credit access?
- Investment doubles
- Investment falls
- Investment rises
- Investment remains constant
-
What is most likely to increase capital investment by UK export firms?
- Higher import tariffs
- Lower export demand
- Stronger pound sterling
- Higher export demand
-
How do government tax allowances on capital equipment affect business investment?
- Investment remains unchanged
- Investment ceases
- Investment increases
- Investment decreases
-
Why is business investment generally more volatile than household spending?
- Constant tax rates
- Fluctuating expectations
- Fixed depreciation rates
- Stable interest rates
-
A firm's investment project costs 1 million and yields a return of 100,000 a year. Ignoring depreciation and risk, what is the approximate rate of return?
- 1%
- 10%
- 0.1%
- 100%
-
Which component accounts for the largest proportion of UK Aggregate Demand?
- Consumer spending
- Government spending
- Investment
- Net exports
-
According to the accelerator theory, investment depends directly on changes in which variable?
- Exchange rate level
- Economic growth rate
- Interest rate level
- Inflation rate level
-
Which factor measures the opportunity cost of using retained profit for capital investment?
- Interest rate
- Exchange rate
- Inflation rate
- Corporation tax rate
-
Which component of investment spending specifically offsets the depreciation of existing capital?
- Portfolio investment
- Net investment
- Foreign direct investment
- Replacement investment
-
Which factor would cause a direct fall in a firm's expected profit from investment?
- Higher economic growth
- Higher interest rates
- Lower interest rates
- Lower corporation tax
-
How do lengthy government planning regulations typically affect business investment decisions?
- They reduce investment
- They increase investment
- They guarantee investment
- They eliminate risk
-
A firm invests 500,000 in a machine that lasts 5 years with straight-line depreciation and no residual value. What is annual depreciation?
- 250,000
- 500,000
- 50,000
- 100,000
-
Which term describes the business optimism and confidence that Keynes argued drives investment?
- Accelerator effect
- Wealth effect
- Multiplier effect
- Animal spirits
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