Use Tobin's Q Theory and the Neoclassical Theory of Investment

question 16

Essay

Use Tobin's q theory and the neoclassical theory of investment to explain how optimistic scenarios of the "information age" would cause overinvestment in computer-related capital goods,and how that overinvestment would cause a sudden reversal.

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Definitions:

Deafferentation

Refers to the loss or interruption of the afferent connections of nerve cells, preventing sensory information from reaching parts of the brain.

Penfield

Refers to Wilder Penfield, a neurosurgeon whose pioneering work in the mid-20th century greatly advanced the understanding of neurological localization of brain functions.

Motor Cortex

The cerebral cortex segment involved in organizing, managing, and executing movements done on purpose.

Anterior Corticospinal Tracts

Nerve pathways that travel from the brain through the spinal cord, involved in the voluntary movement of muscles.