Author Question: Are changes in consumption and investment typically occur in the same direction and at roughly the ... (Read 52 times)

nevelica · **on:** Jun 30, 2018

Are changes in consumption and investment typically occur in the same direction and at roughly the same magnitude? Explain.

What will be an ideal response?

Question 2

If the expected real interest rate 5 and expected inflation 3, the nominal interest rate in year t is approximately

A) 2.
B) 3.
C) 5.
D) 8.
E) 11.

asdfasdf · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

Consumption and investment usually move together but investment is much more volatile than consumption. Because the level of investment is much smaller than the level of consumption, changes in investment from one year to the next are of the same overall magnitude as changes in consumption.

Answer to Question 2

D