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In the Equation It/Y~t=aˉibˉ(Rtrˉ)I _ { t } / \tilde { Y } _ { t } = \bar { a } _ { i } - \bar { b } \left( R _ { t } - \bar { r } \right)

Question 7

Multiple Choice

In the equation It/Y~t=aˉibˉ(Rtrˉ) I _ { t } / \tilde { Y } _ { t } = \bar { a } _ { i } - \bar { b } \left( R _ { t } - \bar { r } \right) , if bˉ\bar { b }
Is close to zero, investment:


A) is not very sensitive to real interest rate changes
B) is very sensitive to changes in the marginal product of capital
C) is very sensitive to real interest rate changes
D) is sensitive to tax rate changes
E) does not depend upon the real interest rate

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