Suppose Congress repeals an investment tax credit that decreases the quantity of investment goods that firms demand at any given interest rate. Which of the following would you expect to occur as a result of this change?

Question

Quizplus · Accepted Answer

Repealing an investment tax credit reduces the demand for investment goods, leading to a decrease in production. This decrease in production can lead to higher unemployment as firms need fewer workers. With lower demand in the economy, inflationary pressures decrease, leading to lower inflation.

Suppose Congress Repeals an Investment Tax Credit That Decreases the Quantity