If the supply of loanable funds increases, the marginal revenue product of capital (MRP_K) that would be needed in order to break even would

Question

Quizplus · Accepted Answer

When the supply of loanable funds increases, the interest rate typically falls. This means that the cost of borrowing money to invest in capital decreases. Therefore, the marginal revenue product of capital (the additional revenue generated by the last unit of capital) that would be needed to break even on this investment would be lower. This is because it costs less to finance the capital, so the revenue generated from it doesn't need to be as high to cover the costs.

If the Supply of Loanable Funds Increases, the Marginal Revenue