The parameters of the investment spending equation are A) I₀: the baseline level of investment spending, and I_y: the marginal propensity to invest. B) I₀: the baseline level of investment spending, and I_r: the interest sensitivity of investment. C) I₀: the interest sensitivity of investment, and I_r: the baseline level of investment spending. D) I₀: the interest sensitivity of investment, and I_r: the marginal propensity to invest.

Question

Quizplus · Accepted Answer

The parameters of the investment spending equation typically include the baseline level of investment spending, which is the investment spending when income and interest rates are zero, and the interest sensitivity of investment, which indicates how investment spending changes with changes in the interest rate.

The Parameters of the Investment Spending Equation Are