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3. For a competitive firm who uses labour and capital as the inputs of production, an increase in the price level will encourage the firm
3. For a competitive firm who uses labour and capital as the inputs of production, an increase in the price level will encourage the firm to: a. hire more labour and rent less capital. b. hire less labour and rent more capital. c. hire less labour and rent less capital. d. has no effect on either the amount of labour or capital utilised. e. hire more labour and rent more capital. and explian why ii) When drawn with the interest rate on the vertical axis and income on the horizontal axis, the IS curve will be steeper the: a. greater the sensitivity of investment spending to the interest rate. b. smaller the level of government spending. c. smaller the sensitivity of investment spending to the interest rate. d. smaller the value of the expediture multiplier. e. larger the level of government spending. and explian why iii) The government introduces an increase in investment tax credits. In a closed economy with the national saving fixed, the real interest rate will a. remain constant. b. rise. c. first fall and then rise. d. fall. e. first rise and then fall. and explain why iv) In the context of the closed economy flexible-price model, a decrease in the real interest rate could be the result of a(n): a. decrease in the level of autonomous investment. b. increase in the level of government spending. c. decrease in the level of government spending. d. decrease in the level of taxes. e. an increase in the level of domestic consumption
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