Gce Model Questions Vol1 2025 Economics Question 10

Practice objective / multiple choice question 10 from the 2025 Gce Model Questions Vol1 Economics examination.

Gce Model Questions Vol1 2025 Economics Objective / Multiple Choice Medium Difficulty
Question 10 GCE_MODEL_QUESTIONS_VOL1 • 2025 • ECONOMICS • objective

The nominal interest rate is 12 % per annum. Expected inflation is initially 8 % and later rises to 10 %. The investment function is \(I = 500 - 5r\), where \(r\) is the real interest rate (in percent). (a) Compute the expected level of investment when inflation is 8 %. (b) Compute the expected level of investment when inflation is 10 %. (c) By how much does investment change?

Answer Options

Correct Answer A. Investment at 8 % inflation = 481.5; at 10 % inflation = 490.9; change ≈ +9.4
B. Investment at 8 % inflation = 480; at 10 % inflation = 485; change ≈ +5
C. Investment at 8 % inflation = 482; at 10 % inflation = 488; change ≈ -6
D. Investment at 8 % inflation = 475; at 10 % inflation = 492; change ≈ +17
Correct Answer
A
Correct Option:
Investment at 8 % inflation = 481.5; at 10 % inflation = 490.9; change ≈ +9.4

About This Question

This is Gce Model Questions Vol1 2025 Economics Question 10. It is one of the objective questions from the 2025 Gce Model Questions Vol1 Economics examination.

Difficulty level: Medium .

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