macroeconomics (Investment)

(e) How does the desired investment demand depend on the real interest rate (r), on the level of productivity (MPK) and on the real installation cost ()? Explain graphically (i.e. using a diagram).

(f) Imagine now that the cost is an INCREASING FUNCTION of the desired amount of capital, say (K) with 0 (K) > 0. If K = 0, then the cost is 0, and then, the cost increases with capital. Compared to the constant cost case, does the rm desire more capital, or less capital? Show graphically (i.e. using a diagram).

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ChatGPT In macroeconomics investment demand is influenced by various factors including the real interest rate level of productivity measured by margin... View the full answer