(1a) Briefly explain the legal forms of business organization in the U.S and ass

Question

(1a) Briefly explain the legal forms of business organization in the U.S and asses the relative significance of each form in industrial production. (1b)How is investment affected by real interest rate? Given the following information, determine the real interest rate for the years 1978 through 1982 assuming that people expect the rate of inflation to be the average rate of inflation in the two previous years. Year: 1977 1978 1979 1980 1981 1982 Nominal interest rate: 5.6% 7.6% 10% 11.4% 13.8% 11.1% Price Level: 60.6 65.2 72.6 82.4 90.9 96.5

Explanation / Answer

When the interest rates are high, borrowing becomes quite expensive for the investors so they make less real investment. The high interest rates make it difficult to cover their expenditure because their products becomes less competitive in both the domestic and international market.

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