Assume a country cannot engage in international borrowing and lending. Using a graph forthe loanable funds market of this economy, show what are the effect on the equilibriumreal interest rate and quantity of investment ifa) The Government offer an i
Assume a country cannot engage in international borrowing and lending. Using a graph for
the loanable funds market of this economy, show what are the effect on the equilibrium
real interest rate and quantity of investment if
a) The Government offer an investment tax credit.
b) The government runs a budget surplus.
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7 replies
marcodgiudice
about 3 years ago
The investment tax credit would shift the demand for loanable funds to the right, increasing the equilibrium real interest rate and quantity of investment. The government running a budget surplus would decrease the supply of loanable funds, increasing the equilibrium real interest rate and decreasing the quantity of investment.
po-bo-1
about 3 years ago
The investment tax credit would shift the demand for loanable funds to the right, increasing the equilibrium real interest rate and quantity of investment. The government running a budget surplus would decrease the supply of loanable funds, increasing the equilibrium real interest rate and decreasing the quantity of investment.
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