Investment will be more variable if
A)there is variability in z'' that causes movements along the investment schedule over time.
B)there is variability in r that shifts the investment schedule over time.
C)stock prices remain sufficiently volatile.
D)there is variability in z'' that shifts the investment schedule over time.
E)the real interest rate remains below the return on stocks.

Question

Quizplus · Accepted Answer

Variability in z'', which represents factors such as technology, government policy, and consumer preferences, can shift the entire investment schedule over time. This means that investment will be more variable as it is dependent on these shifting factors. Variability in r, the real interest rate, can also affect investment but only by shifting the investment schedule along a fixed z'' curve. Therefore, option D is the best choice for investment variability.

Investment Will Be More Variable If