Suppose a New Technology Is Developed That Increases Investment Demand

question 114

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. Assume there is perfect capital mobility for the small open economy.

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Definitions:

Rods

Photoreceptor cells in the retina of the eye that are highly sensitive to light, making them crucial for vision in low light conditions.

Dim Light

Low-level lighting that is not bright or glaring.

Vision

The ability to see; the sense mediated by the eyes that allows for the perception of light, color, and depth.

Vitreous Body

The transparent gel-like substance filling the eye between the lens and the retina, providing it with its spherical shape.