Question 5 (20 marks)

"On December 10, 2010 President Obama signed into law a second stimulus bill formally known as the Tax Relief, Unemployment Insurance Authorization and Job Creation Act 2010. One of the provisions of the act is the increased the fraction of investment spending that firms are allowed to depreciate for tax purposes from 50% to 100%."

Based on the above case and with the aid of appropriate diagram, answer the following questions:

a) What effect should this provision have on the desired capital stock and the level of investment for the year 2011?

b) Can we expect this provision help stimulate the economy in 2011?

Question 6 (20 marks)

COVID-19 pandemic which affected this country in the late of 2019 and early 2020 has given a big impact on the investment sector in this country. Discuss supported by appropriate arguments these TWO (2) matters:

a) How COVID-19 pandemic will affect the investment behavior by the firms and household for year 2021?

b) What are the actions or policies that the government can implement to face this situation?