Refer to the following graph to answer the following questions:
-Assuming the figure represents the market for loanable funds,which of the following would represent a cut in corporate tax rates,causing business owners and managers to become more optimistic?

Question

Refer to the following graph to answer the following questions: 
-Assuming the figure represents the market for loanable funds,which of the following would represent a cut in corporate tax rates,causing business owners and managers to become more optimistic?

Quizplus · Accepted Answer

A cut in corporate tax rates would lead to an increase in investment by businesses. This would shift the supply of loanable funds to the right, from line 2 to line 3, as there would be more funds available for borrowing at a given interest rate. This shift would also lower the interest rate, as shown by the movement from point A to point B on the demand curve. Thus, choice C is the correct answer.

Refer to the Following Graph to Answer the Following Questions