In recent decades the economy has experienced dramatic technological improvement in many types of capital equipment. All else remaining equal, this change has the effect of shifting the investment demand curve to the and causing an excess capital, and thus a
In the equilibrium interest rate.

Question

Quizplus · Accepted Answer

Technological improvements in capital equipment increase the demand for investment, shifting the investment demand curve to the right. This leads to an excess demand for capital, which causes the equilibrium interest rate to rise.

In Recent Decades the Economy Has Experienced Dramatic Technological Improvement