Incorrect \"Consider an investment boom, resulting in an increase in the supply
ID: 1140509 • Letter: I
Question
Incorrect "Consider an investment boom, resulting in an increase in the supply of capital. Use the production model (where capital and labor are treated as constant values) to analyze changes in the equilibrium of the economy. In the labor market the supply shifts to the RIGHT/LEFT/NO SHIFT and the demand shifts to the RIGHT/LEFT/NO SHIFT..As a result the rental rate will INCREASE/DECREASE/NO CHANGE and the amount of capital used by employers will INCREASE/DECREASE/NO CHANGE." Pick the right set of answers. Selected Answer: "Right, No Shift, Decrease, Increase"
Explanation / Answer
Answer: Because of Boom, the supply of capital rises, the rental rate falls, producer will use more capital because it becomes relatively cheaper as compared to labor. The demand curve for labor shifts leftward.
"Consider an investment boom, resulting in an increase in the supply of capital. Use the production model (where capital and labor are treated as constant values) to analyze changes in the equilibrium of the economy. In the labor market the supply shifts to the NO SHIFT and the demand shifts to the LEFT. As a result the rental rate will DECREASE and the amount of capital used by employers will INCREASE .