Why is the demand curve for new capital downward sloping?
What will be an ideal response?
The demand for new capital is downward sloping because there is an inverse relationship between the interest rate and the amount of new capital purchased. As the interest rate rises, some projects will become unprofitable (because their expected rate of return is lower than the market interest rate). Thus, as the interest rate rises, the quantity of new capital demanded will fall.
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In the figure above, the economy is at an equilibrium with real GDP of $16 trillion and a price level of 110. At this point there is
A) an inflationary ga
In a competitive market where the elasticity of the market demand curve is -0.5, there are 100 identical firms, and the elasticity of the supply curve to the other 99 firms is 4. What is the elasticity of the demand curve of the 100th firm?
A) -446 B) -489 C) -50 D) -0.5