Why is the demand curve for new capital downward sloping?
What will be an ideal response?
The demand for new capital is downward sloping because there is an inverse relationship between the interest rate and the amount of new capital purchased. As the interest rate rises, some projects will become unprofitable (because their expected rate of return is lower than the market interest rate). Thus, as the interest rate rises, the quantity of new capital demanded will fall.
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The capture theory of regulation predicts that regulations bring ________ to producers and impose ________ on any individual consumer
A) small benefits; small costs B) small benefits; large costs C) large benefits; small costs D) large benefits; large costs E) large benefits; no costs
The figure above shows the cost, marginal revenue, and demand curves of Golden Chow, a producer of dog food. The market for dog food is monopolistic competition. In the short run, Golden Chow sells 400 cans of dog food per day and makes ________
Other firms have ________ incentive to enter the industry. A) an economic profit of $200 a day; an B) an economic profit of $400 a day; an C) a normal profit of $200 a day; no D) an economic profit of $400 a day; no
When interest rates fall in a given economy, it causes firms to borrow __________ funds used for purchasing capital goods. The result will be a(n) ___________ in the level of capital employed in the economy. In terms of the production function (graphed with labor on the horizontal axis and Real GDP on the vertical axis), this then causes ____________________ which makes the LRAS curve shift
____________ resulting in ______________________. A) more; increase; the production function to shift upward; rightward; economic growth B) less; decrease; the production function to shift downward; leftward; a shrinking economy C) more; increase; a movement up along a given production function; rightward; economic growth D) more; increase; a movement down along a given production function; leftward; a shrinking economy
When workers expect more inflation than actually occurs:
a. the Phillips curve becomes vertical. b. the long-run Phillips curve shifts to the right. c. the short-run Phillips curve shifts to the left. d. there will be a movement down the short-run Phillips curve. e. there will be a movement up the short-run Phillips curve.