For the purposes of integrating forward-looking business investment decisions into a model of macroeconomic behavior, capital employment decisions proceed along at least two dimensions. The most important of these considerations are
A) how much capital stock to maintain and how much to depreciate.
B) how much capital stock to maintain and how quickly to achieve that stock by a flow of investment expenditure.
C) how much capital to rent and how much to purchase.
D) how much of the capital that is rented should be depreciated and how much should be sent back.
E) how fast to expand the capital stock of a growing division and how fast to contract the capital stock of a failing division.

Question

Quizplus · Accepted Answer

The key considerations for integrating forward-looking business investment decisions into a macroeconomic model include determining the desired level of capital stock and the pace of investment to achieve that stock. This involves strategic planning on how much to invest over time to reach or maintain a certain level of capital assets, which directly impacts the firm's capacity for production and its future growth prospects.

For the Purposes of Integrating Forward-Looking Business Investment Decisions into a Model