The United States is experiencing a recession and the government takes action to fix it, we hope.Assume that businesses are granted a tax credit on spending for machinery. Using a correctly labeled graph of the loanable funds market, show the effect of the business sector’s response on the real interest rate. Explain what happens.Using a correctly labeled graph of aggregate demand and aggregate supply, show the impact of this tax credit on each of the following in the short-run.Aggregate demandOutputExplain what happens.Given your answers above, explain what will happen to the country’s production possibilities curve in the long run.

A recession is a substantial, widespread, and long-lasting drop in economic performance. While it is…

Answered: Assume that businesses are granted a…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The United States is experiencing a recession and the government takes action to fix it, we hope.

Assume that businesses are granted a tax credit on spending for machinery. Using a correctly labeled graph of the loanable funds market, show the effect of the business sector’s response on the real interest rate. Explain what happens.
1. Using a correctly labeled graph of aggregate demand and aggregate supply, show the impact of this tax credit on each of the following in the short-run.
Explain what happens.
Given your answers above, explain what will happen to the country’s production possibilities curve in the long run.

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