question archive Determine and explain whether the relationships between the following pairs of dependent and independent variables would be positive or negative: a) Aggregate net investment in South Africa in a given year and GDP for that year
Subject:EconomicsPrice:4.89 Bought3
Determine and explain whether the relationships between the following pairs of dependent and independent variables would be positive or negative: a) Aggregate net investment in South Africa in a given year and GDP for that year. b) Aggregate net investment and the real rate of interest in the same year and country.
a) aggregate net investment in south Africa in the given year and GDP for that year is Positive because
Higher the net investment in Soutg Africa higher the GDP.
GDP=Consumption+ net investment + Government spending + Net exports
So higher the inevestment higher the GDP
B)relationship between real rate interest and investment is Negative.
Higher the real rate interest lower the investment because people will more tend to save than consumption which ultimately reduces the investment hence they are negative relative.
Real rate = nominal rate - inflation rate
The interest rate is opportunity cost for investment.so they do not move in same direction hence negative relation between them.