Author Question: The neoclassical theory of investment A) links investment spending to stock prices. B) ... (Read 52 times)

tatyanajohnson · **on:** Jun 30, 2018

The neoclassical theory of investment

A) links investment spending to stock prices.
B) emphasizes that current investment spending depends positively on the expected future growth of GDP.
C) emphasizes the role of real interest rates and taxes as determinants of investment.
D) suggests that a downturn in real GDP will lead to a sharp fall in investment, which leads to further reductions in GDP through the multiplier.

Question 2

If the interest rate in India increases, how will it affect the net exports of India?

What will be an ideal response?

adf223 · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

C

Answer to Question 2

If the interest rate in India increases, investors will be willing to invest in India. This will cause the demand for Indian rupees to increase. This in turn will cause the rupee to appreciate. An appreciation of the rupee will increase imports in to India and decrease exports from India.