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follows the textbook°s notation. (b) Now assume that domestic investment is very responsive to the interest rate so that U.S. °rms will cancel their new investment plans if the interest rate rises. How will this a/ect the answer you gave previously? i. Solution: If investment is very responsive to the interest rate, then this im- plies that when interest rates rise, investment will decrease by a larger amount. For any given change in the interest rate, investment will change by a larger
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