All else equal,a decrease in the expected future MPK will lead to
A)an increase in the desired investment.
B)no change in the desired investment.
C)a fall in the desired investment.
D)an increase in the desired level of capital.

Question

Quizplus · Accepted Answer

A decrease in the expected future MPK means that the marginal product of capital is expected to be lower in the future. As a result, it becomes less profitable for firms to invest in capital goods. Therefore, the desired investment decreases.

All Else Equal,a Decrease in the Expected Future MPK Will