Investment is not only a major source of economic growth but also a major source volatility in aggregate demand and consequently economic performance. A number of theories have been used to explain the determinants of investments. In addition, many studies have concluded that there are a number of factors which constrain investment in LDCs. Given the foregoing, answer the following questions:

a) Derive the Real User Cost of Capital in the neoclassical theory. (10 Marks)

b) Describe the irrevocable theory of investment. (5 Marks)

c) State the factors that hinder investment in developing countries such as Zambia

(10 Marks)