The market for capital is in equilibrium at an interest rate of 3% and a quantity of $10 million. Suppose that businesses become more optimistic about future demand and start to invest heavily in capital. This would cause the equilibrium interest rate to ____ and the equilibrium quantity of capital to ____.

Question

Quizplus · Accepted Answer

When businesses become more optimistic about future demand and invest more in capital, the demand for capital increases. This shifts the demand curve to the right, leading to a higher equilibrium interest rate and a higher quantity of capital in the market.

The Market for Capital Is in Equilibrium at an Interest