a. Explain in general how the desired stock of capital, K*, is related to the rental cost of capital, rc, and the desired level of aggregate output, Y (3 points) b. The flexible accelerator model asserts that the firm's rate of investment will be greater the larger the gap between the existing stock of capital and the desired stock of capital, and that firms plan on a level of investment to close a fraction, 1, of the gap between the current and desired stock of capital each period. Explain why and how investment spending is related to the desired level of aggregate output and the interest rate. (4 points) c. Would a temporary investment tax credit for businesses or a temporary income tax cut for individuals have a greater effect on GDP? Why? (Hint: remember what the permanent income hypothesis states about income tax. (3 points)