Suppose that the following table represents all of the possible investments in the economy. If the nominal interest rate is six percent, what is the total amount of investment in the economy? (Note: The Returns are for one period later.)
Investment Cost Returns
A $100 $105
B 300 321
C 200 216
D 50 55
E 400 416
At an interest rate of six percent, projects B, C and D are still worthwhile. So there will be $550 worth of investment in the economy.
Economics
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