In the Equation $I _ { t } / \tilde { Y } _ { t } = \bar { a } _ { i } - \bar { b } \left( R _ { t } - \bar { r } \right)$

question 29

Multiple Choice

In the equation $I _ { t } / \tilde { Y } _ { t } = \bar { a } _ { i } - \bar { b } \left( R _ { t } - \bar { r } \right)$ , if $\bar { b }$
Is close to infinity:

• A) investment is extremely sensitive to real interest rate changes
• B) investment is somewhat sensitive to changes in the marginal product of capital
• C) investment is not very sensitive to real interest rate changes
• D) investment is sensitive to tax rate changes
• E) the output gap is zero

---

Definitions:

Reflex Actions

Automatic and involuntary responses to stimuli facilitated by neural pathways known as reflex arcs, crucial for survival by enabling quick reactions without direct involvement of the brain.

Peripheral Nerves

Nerves that are located outside of the brain and spinal cord, responsible for transmitting sensory and motor information between the central nervous system and the rest of the body.

Endorphins

Peptides produced by the central nervous system and the pituitary gland, known for their ability to act as natural painkillers.

Heroin

An opioid drug made from morphine, a natural substance taken from the seed pod of various opium poppy plants.