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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 11

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 }
Equals zero, investment:


A) is sensitive to tax rate changes
B) is extremely sensitive to changes in the marginal product of capital
C) is not very sensitive to real interest rate changes
D) is insensitive to real interest rate changes
E) equals zero

Correct Answer:

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