A level Investment Quiz 1

15 QuestionsMultiple ChoiceFree Practice

About this quiz

This A level Investment Quiz 1 quiz contains 15 multiple choice questions designed to help you revise and test your A level Investment Quizzes knowledge. Select an answer for each question and click “Submit Answer” to see instant feedback. Take your time and try to score as high as possible!

Description

In this quiz, we shall be moving forward into the study of Investment. We will be looking at some exciting concepts such as the Marginal Efficiency of Investment (MEI), the accelerator theory of investment, gross investment, and so on. You are going to master all of these with the aid of the powerful questions that are found in this quiz.

Investment refers to the value of the fixed capital assets produced in an economy over a given period of time. The primary purpose of investment is to generate income or satisfaction. A very solid example of investment is choosing to pursue education in order to acquire skills that will be later used in the generation of income. Investments also come with their risks. For example, there is a probability of you investing in a company and it ends up going bankrupt, or a project that fails to come to pass. This is where the difference between savings and investment comes in. In savings, there are little or no risks involved as compared to investment. Nevertheless, investments are the potential for long-term returns.

This economics quiz is here to assist you in your preparation for the examinations. Do you have what it takes to answer this quiz correctly? Find out by taking the quiz. Good luck.

Progress0 / 15 answered

Question 1 of 15

Which three of the following are accurate descriptions of investment expenditure in the UK?

a) Investment is a flow concept, as it involves a rate of change
b) Investment is a stock concept, as it refers to a total value of capital
c) Investment contributes about 13% of UK aggregate demand
d) Investment contributes about 60% of UK aggregate demand
e) Investment contributes to both demand and supply aspects of the economy; in the latter case influencing real output per unit of factor input

Question 2 of 15

Which two of the following are likely to increase investment expenditure?

a) A rise in the rate of interest
b) A fall in the rate of interest
c) More favourable business expectations and less uncertainty
d) Less favourable business expectations and more uncertainty
e) Higher initial capital outlays on projects

Question 3 of 15

Which two of the following are likely to reduce investment expenditure?

a) Lower initial capital outlays on projects
b) A rise in the rate of interest
c) A fall in the rate of interest
d) More favourable business expectations and less uncertainty
e) Less favourable business expectations and more uncertainty

Question 4 of 15

Which two of the following would shift the ‘Marginal Efficiency of Investment’ (MEI) schedule to the right?

a) A fall in expected annual returns on projects
b) A rise in expected annual returns on projects
c) A rise in the supply price of projects
d) A fall in the supply price of projects
e) A rise in the rate of interest

Question 5 of 15

Which two of the following are characteristic of the ‘Accelerator Theory’ of investment?

a) Relates gross investment to total output in a given year
b) Relates net investment to the rate of change of output
c) Relates net investment to total output in a given year
d) Involves a constant capital/output ratio to be applied when output rises above the full capacity level
e) Involves a variable capital/output ratio to be applied when output rises below the full capacity level

Question 6 of 15

For the following five questions, match each description to the appropriate theory of investment.
The suggestion that the growth of output beyond ‘full capacity’ can have a quantifiable impact on net investment.

Question 7 of 15

Gross investment is seen as depending on last year’s level of output and last year’s capital stock.

Question 8 of 15

Identifies the rate of discount which equates the present value of the expected returns on a project to the initial capital outlay required to fund that project.

Question 9 of 15

Greater availability of the firm’s own internally generated funds is seen as reducing the cost and lowering the risk of investment.

Question 10 of 15

UK banks are often criticised for ‘short-termism’ in their approach to lending.

Question 11 of 15

Gross investment over-estimates the change in the stock of capital or inventories in the year since it does not take into account the depreciation of those assets.

Question 12 of 15

A less optimistic business environment will shift the ‘Marginal Efficiency of Investment’ (MEI) schedule above and to the right, reducing investment at any given rate of interest

Question 13 of 15

The ‘Capital Stock Adjustment Model’ suggests that investment is positively related to the expected level of output and negatively related to the existing level of capital stock.

Question 14 of 15

As well as raising the level of investment, raising the efficiency with which any given amount of investment is utilised will also be important to those interested in ‘supply-side’ policies.

Question 15 of 15

A rise in output of £50m for an economy with a capital/output ratio of 5 and operating below full capacity will, via the ‘Accelerator Theory’, raise net investment by £250m.