Under Keynesian theory of income determination, investment
Depends on income
Incorrect AnswerEndogenous
Incorrect AnswerDepends on money supply
Incorrect AnswerExplanation:
- Option 1: Depends on income
Investment decisions are largely influenced by investor expectations and interest rates, not directly by current income levels.
- Option 2: Endogenous
Endogenous factors are determined within the model. However, Keynesian economics typically views investment as not purely determined by current economic variables.
- Option 3: Exogenous
Investment is determined by factors external to the current economic model, such as technological changes and investor confidence.
- Option 4: Depends on money supply
While money supply can influence interest rates, which in turn affect investment, it’s not directly connected as per Keynesian theory.
In Keynesian theory, investment is usually considered exogenous.
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