Use the neoclassical model of investment to explain the impact of each of the following onthe rental

price of capital,the cost of capital,and the investment.

1. Use the neoclassical model of investment to explain the impact of each of the following on the rental price of capital, the cost of capital, and the investment. a) Following the COVID shock, the consumer price index (CPI) as a measure of the overall price level (P) will decline. Assuming other variables, including the price of capital (Pk), are constant, explain the impact of declining the overall price level (P) on the rental price of capital, the cost of capital, and the investment. b) Following the COVID shock, some people lost their jobs temporarily. Assuming other variables are constant, discuss the impact of the declining labour force on the rental price of capital, the cost of capital, and the investment. c) In response to the COVID shock, the Bank of Canada declines the nominal rate of interest from around 2% to around 0.5%. Assuming other variable is constant, discuss the impact of declining the nominal rate of interest on the rental price of capital, the cost of capital, and the investment