Calculating the Impact of Monetary Policy on Aggregate Investment
An economy has four potential investment projects, each requiring an initial outlay and generating a return in one year. The details are in the table below.
| Project | Initial Cost | Expected Future Return |
|---|---|---|
| A | $1,000 | $1,080 |
| B | $2,000 | $2,220 |
| C | $1,500 | $1,590 |
| D | $500 | $560 |
Initially, the prevailing interest rate is 5%. The central bank then raises the interest rate to 10%. Based on the present value criterion for investment decisions, by how much does the total level of investment in the economy change? Provide your answer as a number, indicating a decrease with a negative sign (e.g., -1000).
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Introduction to Macroeconomics Course
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