How might the optimal investment mix change

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Indonesia, with its rising middle class and large population, has become a magnet for Singapore firms looking for growth. Indonesian law stipulates a minimum wage that adjusts each year to a formula based on the rate of growth of GDP and the rate of inflation. The wage currently stands at 18,056 Rupiah/hour. Indonesia’s corporate bond rates have been increasing at the rate of inflation and now stand at 10.25%. What would be an optimal mix of capital and labor for Singapore firms investing for one year only? If one were planning for a longer time period, how might the optimal investment mix change? Why?

Reference no: EM131487706

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