In the equation
,if
Equals zero,
A)investment is sensitive to tax rate changes.
B)investment is extremely sensitive to changes in the marginal product of capital.
C)investment is not very sensitive to real interest rate changes.
D)investment is insensitive to real interest rate changes.
E)investment equals 0.

Question

In the equation 
,if 
Equals zero,
A)investment is sensitive to tax rate changes. 
B)investment is extremely sensitive to changes in the marginal product of capital. 
C)investment is not very sensitive to real interest rate changes. 
D)investment is insensitive to real interest rate changes. 
E)investment equals 0.

Quizplus · Accepted Answer

When 11ea895d_4d7f_dbbb_8397_651c7c599c1c_TB4305_11 equals zero, it means that the expected return on investment is equal to the real interest rate. This means that the investment is not very sensitive to changes in the real interest rate, as it is already in equilibrium with it. Therefore, choice D is correct.

In the Equation