In many economies, a substantial fraction of investment is by multinational corporations (MNCs) whose stock value is determined on global markets
Based on Tobin's q theory, how might we expect MNC investment to affect the volatility of aggregate investment in an economy?
If investment is sensitive to global market valuation, then it is less sensitive to economic conditions in a particular economy. The economy's business cycle should have lower amplitude, and investment should be less volatile. Unless the (global) market valuation of the MNCs is more volatile than the economy's aggregate investment, or happens to be closely correlated with the economy's business cycle.
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If oil prices fall at the same time that the federal government increases its purchases, in the short run
A) aggregate output and the price level will both increase. B) aggregate output will increase, but the price level will fall. C) aggregate output and the price level will both fall. D) aggregate output will increase, but the price level may either increase or decrease.
Milton Friedman believes that consumption spending depends on both permanent and transitory income
Indicate whether the statement is true or false