Suppose that businesses in Japan reduce their spending on plant and equipment. What will be the effect on spending on plant and equipment by businesses in the United States?
What will be an ideal response?
Because Japan is a large open economy, the decrease in the demand for loanable funds in Japan will lower the world real interest rate. At a lower real interest rate, businesses in the United States will increase their spending on plant and equipment. Note that this answer ignores the potentially offsetting effect operating through the impact of lower spending on plant and equipment in Japan on Japanese national income and on Japanese demand for goods and services produced in the United States.
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Which of the following about corporations is TRUE?
A) The cost of capital and labor is high relative to that paid by a proprietorship. B) Profits are taxed only once as the owners' income. C) The owners' entire wealth is at risk. D) Corporations' profits are taxed independently of their owners' incomes.
A perpetuity for sale at $100,000 that promises a yearly payment of $5,000 has an effective yield of
A) 2%. B) 5%. C) 20%. D) 50%. E) 2,000%.
The economic incidence of the tax means who:
A. is legally obligated to pay the tax to the government. B. actually loses more surplus as a result of the tax. C. benefits the most from of any sort of tax. D. gains surplus as a result of the government redistributing tax revenue.
If the supply curve of labor facing the firm is upward sloping, the wage rate and the MLC are identical
Indicate whether the statement is true or false