Question

8. Does autonomous investment increase or decrease when the following things happen? Why?

a. The interest rate increases -

b. A new breakthrough in science opens new areas of technological innovation for industry.

c. The stock market collapses, and the general feeling is one of pessimism

Answer 1

a ) As the interest rate rises , investment in the country will plunged . As the interest rate of the country rises , it is now become expensive to have a credit to open the firms and invest in country . This will discourage investors to invest in the country as they have to give hefty interest rate on loans that they have taken . So investment will fall. Hence they have a negative relationship .

b ) A new breakthrough in science opens new areas of technological innovation for industry will definately rise the investment in the country . The deameanor of investment will seems to soured up when there is a technology innovation in some particular country as it solves convoluted situations of the country abreast with swelling of the firms profit . Hence investment will rise .

c ) The stock market collapses, and the general feeling is one of pessimism will lead to fall in the investment . As there is a stock market collapses, many investors looses their money and profit and some may be occuring through hefty losses . Due to this there is a feeling of stigma . In this lamping situation among investors they will not even think of more investments . And hence investment will fall .