= 9.12. Consider the model of investment with kinked adjustment costs in Section 9.8. Describe the effect of each of the following on the ġ O locus, on the area where K = 0, on 9 and K at the time of the change, and on their behavior over time. In each case, assume 9 and K are initially at Point E+ in Figure 9.13. (a) There is a permanent upward shift of the π(•) function. (b) There is a small permanent rise in the interest rate. (c) The cost of the first unit of positive investment, c+, rises. (d) The cost of the first unit of positive investment, c+, falls.
= 9.12. Consider the model of investment with kinked adjustment costs in Section 9.8. Describe the effect of each of the following on the ġ O locus, on the area where K = 0, on 9 and K at the time of the change, and on their behavior over time. In each case, assume 9 and K are initially at Point E+ in Figure 9.13. (a) There is a permanent upward shift of the π(•) function. (b) There is a small permanent rise in the interest rate. (c) The cost of the first unit of positive investment, c+, rises. (d) The cost of the first unit of positive investment, c+, falls.
Chapter1: Making Economics Decisions
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![=
9.12. Consider the model of investment with kinked adjustment costs in Section 9.8.
Describe the effect of each of the following on the ġ O locus, on the area
where K = 0, on 9 and K at the time of the change, and on their behavior over
time. In each case, assume 9 and K are initially at Point E+ in Figure 9.13.
(a) There is a permanent upward shift of the π(•) function.
(b) There is a small permanent rise in the interest rate.
(c) The cost of the first unit of positive investment, c+, rises.
(d) The cost of the first unit of positive investment, c+, falls.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F5f5cf8a8-dca5-417b-a719-fcea658a7595%2F81a964ef-7506-4e03-9773-05b555345804%2F7oc29nh_processed.jpeg&w=3840&q=75)
Transcribed Image Text:=
9.12. Consider the model of investment with kinked adjustment costs in Section 9.8.
Describe the effect of each of the following on the ġ O locus, on the area
where K = 0, on 9 and K at the time of the change, and on their behavior over
time. In each case, assume 9 and K are initially at Point E+ in Figure 9.13.
(a) There is a permanent upward shift of the π(•) function.
(b) There is a small permanent rise in the interest rate.
(c) The cost of the first unit of positive investment, c+, rises.
(d) The cost of the first unit of positive investment, c+, falls.
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