Question
When the expected future marginal product of capital
increases, then the IS curveSolution
When the expected future marginal product of capital increases, it implies that businesses expect higher returns on their investments in capital. This increase in expected returns leads to higher levels of investment at any given interest rate. Consequently, the IS curve, which represents the relationship between the interest rate and the level of output where the goods market is in equilibrium, will shift to reflect this increased investment.
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