The effect of EMP on Tobin's q affects the economy primarily through firm investment.

Question

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The effect of EMP (Electromagnetic Pulse) on Tobin's q (a ratio used to measure a firm's market value relative to its asset replacement cost) can influence firm investment decisions. If EMP impacts the operational capacity or asset value of firms, it can alter Tobin's q, thereby affecting firms' incentives to invest. A lower Tobin's q might discourage investment, while a higher q could encourage it, thus impacting the broader economy through changes in firm investment behavior.

The Effect of EMP on Tobin's Q Affects the Economy