If the government instituted an investment tax credit,then which of the following would be higher in equilibrium?

Question

Quizplus · Accepted Answer

An investment tax credit would encourage investment and increase the demand for loanable funds, causing the interest rate to rise. The higher interest rate would also make saving more attractive, as individuals would earn a higher return on their saved funds. Therefore, both saving and the interest rate would be higher in equilibrium.

If the Government Instituted an Investment Tax Credit,then Which of the Following