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Author Question: Investment demand is downward sloping because A) an increase in investment demand causes interest ... (Read 59 times)

mspears3

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on: Jul 1, 2018
Investment demand is downward sloping because
 
  A) an increase in investment demand causes interest rates to fall.
  B) at lower interest rates, firms will undertake more investment.
  C) at lower interest rates, firms will undertake less investment.
  D) None of the above.

Question 2

Suppose coal sells for 50 per ton and can be mined at a constant marginal cost of 20 per ton. Forecasters predict that the price of coal next year will be 55. If your marginal cost next year will still be 20 and the interest rate is 10, do you sell coal today?
 
  What will be an ideal response?


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marict

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Reply #1 on: Jul 1, 2018
Answer to Question 1

B

Answer to Question 2

You are indifferent if coal prices rise (10 of 50 - 20 ) by 3. Since coal prices are expected to rise by 5, you will wait until next year.


mspears3

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Reply #2 on: Jul 1, 2018
Correct answers!


marict

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Reply #3 on: Jul 1, 2018
Great! Please up vote :D


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