Reducing business taxes or providing specific investment incentives can shift the demand for loanable funds curve

Question

Quizplus · Accepted Answer

When business taxes are reduced or investment incentives are provided, businesses are encouraged to invest more, resulting in an increase in the demand for loanable funds. This shift of the demand curve to the right will lower interest rates, making it easier and cheaper for firms to borrow and invest. As a result, this will boost the growth rate of the economy's capital stock, leading to increased productivity and higher living standards. Therefore, reducing business taxes or providing specific investment incentives can shift the demand for loanable funds curve rightward, speed up the growth of the capital stock, and improve the standard of living.

Reducing Business Taxes or Providing Specific Investment Incentives Can Shift