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Answer to Question #213638 in Macroeconomics for Keitumetse
Question #213638
Discuss the neoclassical model of investment and Tobin's q theory.
Expert's answer
The neoclassical model of investment explains the causes of investment fluctuations responsible for the business cycle's occurrence. In contrast, Tobin's q theory explains that the market is at equilibrium if market value equals replacement cost.
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