b. Select the answer that describes the adjustment process in this market. Firms find more investments are profitable and increase their demand. As a result, the interest rate rises. Firms find more investments are unprofitable and decrease their supply. As a result, the interest rate rises. O Firms find more investments are profitable and increase their supply. As a result, the interest rate falls. Firms find more investments are unprofitable and decrease their demand. As a result, the interest rate falls.

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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b. Select the answer that describes the adjustment process in this market.
Firms find more investments are profitable and increase their demand. As a result, the interest rate rises.
Firms find more investments are unprofitable and decrease their supply. As a result, the interest rate rises.
Firms find more investments are profitable and increase their supply. As a result, the interest rate falls.
Firms find more investments are unprofitable and decrease their demand. As a result, the interest rate falls.
Transcribed Image Text:b. Select the answer that describes the adjustment process in this market. Firms find more investments are profitable and increase their demand. As a result, the interest rate rises. Firms find more investments are unprofitable and decrease their supply. As a result, the interest rate rises. Firms find more investments are profitable and increase their supply. As a result, the interest rate falls. Firms find more investments are unprofitable and decrease their demand. As a result, the interest rate falls.
Businesses in some parts of Canada are eligible for The Atlantic Investment Tax Credit, a 10% tax credit. The Canadian
government has decided to decrease this credit from 10% to 5%. The graph below is the hypothetical loanable funds market
in Canada prior to the cut.
a. Use the interactive graph to illustrate the impact this decrease in the tax credit will have, holding all else constant.
Interest rate (%)
10
9
8
7
6
5
4
3
2
1
0
0
5
10 15 20 25 30 35
Quantity of loanable funds (in billions)
40
Supply
Demand
45
50
Transcribed Image Text:Businesses in some parts of Canada are eligible for The Atlantic Investment Tax Credit, a 10% tax credit. The Canadian government has decided to decrease this credit from 10% to 5%. The graph below is the hypothetical loanable funds market in Canada prior to the cut. a. Use the interactive graph to illustrate the impact this decrease in the tax credit will have, holding all else constant. Interest rate (%) 10 9 8 7 6 5 4 3 2 1 0 0 5 10 15 20 25 30 35 Quantity of loanable funds (in billions) 40 Supply Demand 45 50
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