When drawn against the real interest rate,the optimal investment schedule shifts to the right if
A) current total factor productivity z increases.
B) current total factor productivity z decreases.
C) future total factor productivity z' increases.
D) future total factor productivity z' decreases.
E) future total factor productivity z' remains constant.

Question

Quizplus · Accepted Answer

A higher future total factor productivity means that the returns from investment in the future will be higher, making it more attractive to invest now. This would shift the investment schedule to the right, indicating more investment at each level of the real interest rate. Therefore, the correct choice is C.

When Drawn Against the Real Interest Rate,the Optimal Investment Schedule