1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Artist 52 [7]
3 years ago
8

Neoclassical Model of Investment" (1 point): In class, we discussed the idea of net investment, and how it could change in respo

nse to changes in economic conditions. Consider the following potential changes in the economy and discuss what the immediate impact of these changes will be for the rental price of capital, the cost of capital, and net investment.
(a) Anti-inflationary monetary policy raises the real interest rate (r ↑)
(b) An earthquake destroys part of the capital stock (K ↓)
(c) Immigration of foreign workers increases the size of the labor force (L ↑)
(d) Advances in computer technology make production more efficient (A ↑)
Business
1 answer:
statuscvo [17]3 years ago
6 0

Answer:

Take Note that the model has following relationship between investment and factors that affect it

Int = F(Ye, it, d, πe, tc, Kt-1)

Net investment is a function of

Expected output (Ye),

Rental or user cost of capital (such as nominal interest rate it),

Expected inflation (πe),

Corporate tax/ investment tax credit,

Existing stock of capital

For a given stock of capital,

A rise in expected output (Ye), increases investment

A rise in expected inflation (πe) increases investment

A rise in the investment tax credit increases investment.

A rise in nominal/real rate of interest decreases investment

A rise in corporate income tax decreases net investment

(a) Anti-inflationary monetary policy raises the real interest rate (r ↑). As mentioned, it will depress net investment as firms have to pay a higher rate of interest on the investment made. Such policy increases rental cost of capital and it will decrease the desired capital stock.

b) An earthquake destroys part of the capital stock (K ↓). This will reduce net investment, increases rental cost of capital and it will decrease the desired capital stock.

(c) Immigration of foreign workers increases the size of the labor force (L ↑). With more workers to share the capital stock, marginal producivity of capital rises and so net investment increases. This decreases rental cost of capital and it will increase the desired capital stock.

(d) Advances in computer technology make production more efficient (A ). This causes the net investment to increase as the marginal productivity of capital will increase. This decreases rental cost of capital and it will increase the desired capital stock.

Explanation:

You might be interested in
Alternative or non-traditional assessments are become more popular among teachers. One type of alternative assessment is called
Alexxx [7]

Answer:

Alternative or non-traditional assessments are becoming increasingly popular with teachers. An alternate evaluation type is called _Task

Explanation:

3 0
2 years ago
If a journal entry and posting for the use of office supplies during the year is accidentally omitted, what would be the impact
jolli1 [7]
<span>It is imperative to have accurate information when completing year end financial statements. If a journal entry and posting for the use of office supplies was omitted in error, the financial statements would not be complete, and the company could possibly lose out on a tax deduction.</span>
4 0
2 years ago
Construction managers can be salaried employees or work for___________.
mestny [16]

compianies or whoever hires the construction workers.

6 0
3 years ago
A manufacturer of luxury yachts would use which type of costing​ system?
GaryK [48]
The answer is Job costing. Because Job costing is used for small production of unique products such as yachts.
7 0
3 years ago
Why is Earned Value a very powerful tool? Answer: It combines the cost, scope, and ____________ as an integrated tool to calcula
nataly862011 [7]
Answers
1) Time
2) cost analysis or performance measurement.

Explanation


Earned value — it integrates cost, time and the work done (or scope) and can be used to forecast future performance and project completion dates and costs...
7 0
2 years ago
Other questions:
  • The discovery of a large oil deposit off a nation's shores would be what type if economic variable?
    13·2 answers
  • The ______ predicts that when someone is kind to us we will return their kindness.
    6·1 answer
  • TB MC Qu. 4-44 Privott, Inc., manufactures ... Privott, Inc., manufactures and sells two products: Product Z9 and Product N0. Th
    11·1 answer
  • A project with a life of one year has an accounting break-even point of 2,962 units. The fixed costs are $46,308 and the depreci
    9·1 answer
  • _____ is used to coordinate supply chain members through point-of-sale (POS) data sharing and joint planning. a. Confidentiality
    13·2 answers
  • If a sole proprietorship fails, the owner of the business will _______
    10·1 answer
  • The following are national income account data for a hypothetical economy in billions of dollars: gross private domestic investm
    12·1 answer
  • Name the written test a potential driver must pass and list the minimum required score to earn a learner’s license.
    11·1 answer
  • Angie and Brad form Cats Are Us, Inc. Angie contributes $120,000 cash for 60% of the stock. Brad contributes an asset with an FM
    9·1 answer
  • To convince his manager that a new copier was needed, Darrin kept track of the lost productivity that resulted from employees ha
    13·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!