Let's begin with the interest elasticity of investment (IEI). IEI is the responsiveness of investment to changes in interest rate..Assume IEI is zero the IS slope will be vertical because investment is inelastic. Remember IS is the combination of interest rate and output and actually, it's slope depends on the savings curve. IS is usually downward sloping but in this case it's vertical.
Imran S.
asked • 06/30/21advanced microeconomics
Explain if the interest elasticity of investment demand is zero. What will be the resulting slop of IS schedule?
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