Suppose government puts a tax on investment at rate τ. That is,you get only 1 − τ apple tree next period if you invest one applethis period. Derive the investment demand equation. What would bethe effect of this tax on net exports and real exchange rate in anopen economy in long run and very-long run? Explain in detail byshowing the changes in the relevant markets.
Seriously?! thats how the question is asked in the assignment! iexpect an answer for this asap!
