This topic contains a solution. Click here to go to the answer
« previous next »

Author Question: Year 2 nominal GDP is A) 200. B) 270. C) 310. D) 390.[br][br][b][color=#7BCCB5]Question ... (Read 60 times)

mia

  • Hero Member
  • *****
  • Posts: 564
on: Jun 30, 2018
Year 2 nominal GDP is
 
  A) 200.
  B) 270.
  C) 310.
  D) 390.

Question 2

Suppose the government decides to decrease the amount of investment spending that firms are allowed to depreciate for tax purposes from 50 to 25, effective next year.
 
  What effect should this change have on the desired capital stock and the level of investment spending next year? Use a graph to explain your answer.


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

Li Jun

  • Sr. Member
  • ****
  • Posts: 335
Reply #1 on: Jun 30, 2018
Answer to Question 1

D

Answer to Question 2

If depreciation is decreased, the tax rate on investment projects next year has effectively increased, so the after-tax user cost of capital curve will shift up, from uc1 to uc2. This decreases the desired capital stock from K1 to K2. The decrease in the desired capital stock means the gap between the desired capital stock and yesterday's capital stock has decreased, so firms will decrease investment spending today to try to decrease the capital stock toward the desired level.


mia

  • Member
  • Posts: 564
Reply 2 on: Jun 30, 2018
YES! Correct, THANKS for helping me on my review

dawsa925

  • Member
  • Posts: 326
Reply 3 on: Yesterday
Thanks for the timely response, appreciate it

« previous next »
 

Did you know?

All patients with hyperparathyroidism will develop osteoporosis. The parathyroid glands maintain blood calcium within the normal range. All patients with this disease will continue to lose calcium from their bones every day, and there is no way to prevent the development of osteoporosis as a result.

Did you know?

Once thought to have neurofibromatosis, Joseph Merrick (also known as "the elephant man") is now, in retrospect, thought by clinical experts to have had Proteus syndrome. This endocrine disease causes continued and abnormal growth of the bones, muscles, skin, and so on and can become completely debilitating with severe deformities occurring anywhere on the body.

Did you know?

Sildenafil (Viagra®) has two actions that may be of consequence in patients with heart disease. It can lower the blood pressure, and it can interact with nitrates. It should never be used in patients who are taking nitrates.

Did you know?

About 100 new prescription or over-the-counter drugs come into the U.S. market every year.

Did you know?

The word drug comes from the Dutch word droog (meaning "dry"). For centuries, most drugs came from dried plants, hence the name.

Changes in boreal forest composition along a chronosequence in Quebec. Dates refer to the year of th Changes in boreal forest composition along a chronosequence in Quebec. Dates refer to the year of th
Why Different Constellations Are Visible at Different Times of the Year Why Different Constellations Are Visible at Different Times of the Year
Effects of Therapy for Stuttering A functional MRI scan shows regions of the superior temporal lobe Effects of Therapy for Stuttering A functional MRI scan shows regions of the superior temporal lobe
Sam and Jen had a tax liability of 5,115 last year. They were entitled to tax credits of 112 ... Sam and Jen had a tax liability of 5,115 last year. They were entitled to tax credits of 112 ...
Light Green Eye Color Light Green Eye Color
economic question economic question
Video: Calvin cycle (The light-independent reactions )

For a complete list of videos, visit our video library