The following graph depicts the market for loanable funds. An investment tax credit effectively lowers the tax

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The following graph depicts the market for loanable funds. An investment tax credit effectively lowers the tax bill of any firm that purchases new capital in the relevant time period. Suppose the government repeals a previously existing investment tax credit. Shift the appropriate curve(s) on the following graph to show the impact of this policy.

The repeal of the previously existing tax credit causes the real interest rate to (?) and the level of investment to (?).

Related Book For answer-question

Macroeconomics

ISBN: 978-1319120054

3rd Canadian edition

Authors: Paul Krugman, Robin Wells, Iris Au, Jack Parkinson

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Posted Date: Feb 23, 2024 12:51 AM

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The following graph depicts the market for loanable funds. An investment tax credit effectively lowers the tax

Question:

REAL INTEREST RATE (Percent) Supply Demand QTY OF LOANABLE FUNDS (Billions of dollars) REAL INTEREST RATE (Percent) Supply Demand QTY OF LOANABLE FUNDS (Billions of dollars)

Expert Answer:

You are right The repeal of an investment tax credit would cause the demand for loa... View the full answer

Macroeconomics

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