An invention that raises the future marginal product of capital would cause an increase in desired investment,which would cause the investment curve to shift to the ________ and would cause the real interest rate to ________.
A)right;increase
B)right;decrease
C)left;increase
D)left;decrease

Question

Quizplus · Accepted Answer

The invention that raises the future marginal product of capital is a positive technological shock that increases returns on investment, which leads to an increase in desired investment. This upward shift in the investment curve results in a higher equilibrium real interest rate. Therefore, the correct answer is A) rightward shift in the investment curve and an increase in the real interest rate.

An Invention That Raises the Future Marginal Product of Capital