Determine how the following will affect the slope of the, Ask an Expert

Economics

The two questions below are based on the Real Inter temporal model with investment

1. Determine, how the following will affect the slope of the output demand curve, and explain your results:

a) The inter temporal substitution effect of the real interest rate on current consumption increases.

b) The demand for investment goods becomes less responsive to the real interest rate

2. On an investment diagram(r on the vertical axis, I on the horizontal axis), draw a firm\'s investment schedule.

Illustrate what happens to this curve in the following three cases( draw a separate diagram for each case):

a) The stock of current capital suddenly increases

b) Future total factor productivity decreases

c) Current total factor productivity increases( but not the future one)

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Macroeconomics, Economics

Category:- Macroeconomics
Reference No.:- M9166773

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