Essay
a. Suppose there is a technological breakthrough that increases the productivity of all capital and, consequently, increases the demand for investment. Using the long-run model of the economy developed in Chapter 3, graphically illustrate the impact of the increased investment demand. Be sure to label:
i. the axes
ii. the curves
iii. the initial eqilibrium values
iv. the direction curves shift
v. the terminal equilibrium values
b. State in words what happens to
i. the real interest rate
ii. nafional saving
iii. investment
iv. consumption
v. output.
Correct Answer:
Verified
a. 
b. i. real interest rate increases...View Answer
Unlock this answer now
Get Access to more Verified Answers free of charge
Correct Answer:
Verified
b. i. real interest rate increases...
View Answer
Unlock this answer now
Get Access to more Verified Answers free of charge
Q47: In the classical model with fixed income,
Q48: In a closed economy, private saving equals:<br>A)
Q49: The production function feature called "constant returns
Q50: In the circular flow diagram, firms receive
Q51: Other things equal, an increase in the
Q53: With a Cobb-Douglas production function, the share
Q54: According to the model developed in Chapter
Q55: Public saving is:<br>A) always positive.<br>B) always negative.<br>C)
Q56: An example of increasing returns to scale
Q57: Assume that a competitive economy can be