According to the Neoclassical Model of Investment, When the Real

question 46

Multiple Choice

According to the neoclassical model of investment, when the real interest rate increases, business fixed investment
Because the of capital increases.

• A)increases; marginal product
• B)increases; cost
• C)decreases; marginal product
• D)decreases; cost

---

Definitions:

Dividends

Payments made by a corporation to its shareholders out of its profits or reserves.

Tax-exempt Interest

Interest income that is not subject to federal income tax, such as that earned from certain municipal bonds.

Interest on a Savings Account

The amount paid by a bank or financial institution to depositors for holding money in a savings account.

Municipal Bonds

Municipal bonds are debt securities issued by states, cities, and other governmental entities to fund public projects, and typically offer tax-free interest payments to investors.