A firm that wishes to maximize profits will continue to purchase capital goods until the

In the following equation, gdp refers to gross domestic product, and FDI refers to foreign direct investment. ? log(gdp) = 2.65 + 0.527log(bankcredit) + 0.222FDI                    (0.13)   (0.022)                            (0.017) ? Which of the following statements is then true?

A. If gdp increases by 1%, bank credit increases by 0.527%, the level of FDI remaining constant. B. If bank credit increases by 1%, gdp increases by 0.527%, the level of FDI remaining constant. C. If gdp increases by 1%, bank credit increases by log(0.527)%, the level of FDI remaining constant. D. If bank credit increases by 1%, gdp increases by log(0.527)%, the level of FDI remaining constant.

Which of the following lags makes stabilization policy more problematic?

A. Expenditure lags B. Recognition lags C. Policy lags D. All of these responses are correct.