Investment Exam Questions
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June

1995 – Why does investment fluctuate so much?  Can this be explained solely in terms of

   movements in interest rates?

1996 – “High interest rates will encourage savings and therefore boost investment”

               “High interest rates will increase the cost of capital and depress investment”

   Can these two statements be reconciled?  Does the government have other instruments

   through which top influence investment?

1997 – Either: A. Can governments do anything to cause private sector investment to increase?

               Or: B. “There can be no investment without savings therefore an increase in savings is good

               for investment”.  “If savings increase consumption will fall and entrepreneurs will cut back 

            their investment.  Higher savings are therefore bad for investment.”   Discuss.

1998 – “Savings equal investment, therefore increasing savings increases investment’.  Is this

            correct?  Explain your answer.

1999 – no question

2000 – Should investors discount the prospective yields on a project using the market interest rate?

2000 – (See also saving & investment)  What is the ‘paradox of thrift’?  Will an increase in national

            savings lead to an increase or a decrease in national income over time?

(Why not also do: what is the relationship between Saving, consumption, and investment – see also you’re A-Level essay & plan)

September

1994 – Explain  the mechanism by which a change in the rate of interest affects investment.

1995 – Would a rise in government investment in infrastructure increase or decrease private sector

            investment?

1996 – no question

1997 – “It is investment in stocks that ensures that investment always equals savings but unplanned

            investment in stocks is evidence that the country is unlikely to be in equilibrium”.  Explain

            this statement.  Explain why you agree or disagree with this statement.

1998 – “Savings equal investment.  Therefore it makes no difference whether the government

             designs its policy to increase savings or to increase investment”.  Discuss.

Other Notes in this Category

1. Investment
2. Investment Exam Questions
3. Macroecomic Questions : The Structure of the British Economy
4. Money Demand Exam Questions
5. Unemployment Exam Questions

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