Suppose increased concerns about terrorism make firms less optimistic about the future marginal revenue products of...
Suppose increased concerns about terrorism make firms less optimistic about the future marginal revenue products of capital.
What will be the impact on the economy’s normal real interest rate and normal investment?
Homework Answers
This will discourage firms from making investments. Therefore, the demand for loanable funds would increase. This will result in higher real interest rates. However, normal investment would fall due to less investment by firms.
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Suppose increased concerns about terrorism make firms less
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