Suppose a New Technology Is Developed That Increases Investment Demand

question 4

Essay

Suppose a new technology is developed that increases investment demand in both a closed economy and in a small open economy that are in other ways identical.Holding other factors constant,will the quantity of investment spending increase more in the closed economy or in the small open economy? Explain.Assume prices are flexible and that factors of production are fully employed in both economies.Use the basic version of the open-economy model that abstracts from foreign debt accumulation.

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Definitions:

Annual Revenues

The total income generated by a business from its operations over a fiscal year before any expenses are subtracted.

Voting Securities

Financial instruments that give the holder the right to vote on matters of corporate policy and the composition of the board of directors.

Non-Affiliates

Entities or individuals that are not directly connected through ownership or control with another entity.

Audit Committee

A subcommittee of a company's board of directors that is responsible for overseeing financial reporting and disclosure.