TRUE or FALSE
1. Neoclassical investment theory explains that investment behavior of firms relates to the balance between the value of the marginal product of capital and the rental cost of capital. Since output increases with more capital employment, with other inputs constant, firms will employ more capital even if rental cost of capital rises.
2. The bigger the discount rate on banks’ borrowing from the Central Bank, the bigger is the money supply for a given supply of high-powered money.
3. Other things equal, if the public prefers to hold more currency compared to deposits, the bigger is money stock.
4. The higher the rate of interest, the bigger is money stock for a given supply of high-powered money.