Explain the relationship between the real interest rate and investment demand. Compare that relationship to the relationship between expected profit and investment demand
What will be an ideal response?
The real interest rate determines the quantity of investment demanded. There is an inverse relationship between the real interest rate and the quantity of investment demanded. Expected profit affects investment. An increase in the expected profit from investing increases investment. Hence there is a positive relationship between investment and expected profit.
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Which of the following is true?
A) MSB = MB + Marginal external benefit. B) MB = Marginal external benefit - MSB. C) MB = Marginal external benefit + MSC. D) MSB = Marginal external cost - marginal external benefit. E) MSB = MB + Marginal external benefit - Marginal external cost.
Suppose that the price of capital falls. Does this necessarily imply that the demand for laborwill fall? Explain
What will be an ideal response?
A minimum wage that is set above a market's equilibrium wage will result in
a. an excess demand for labor, that is, unemployment. b. an excess demand for labor, that is, a shortage of workers. c. an excess supply of labor, that is, unemployment. d. an excess supply of labor, that is, a shortage of workers.
What are the conditions for long-run equilibrium?
What will be an ideal response?