Use the following to answer questions .
Exhibit: Investment Demand
-(Exhibit: Investment Demand) Which panel represents the result of repealing a significant investment tax credit?

Question

Use the following to answer questions .
Exhibit: Investment Demand 
-(Exhibit: Investment Demand) Which panel represents the result of repealing a significant investment tax credit?

Quizplus · Accepted Answer

Panel (b) represents the result of repealing a significant investment tax credit as there is a downward shift in the investment demand curve, indicating a decrease in investment demand at every interest rate level. Panels (a) and (c) show the effect of changes in other factors, such as business expectations and technological progress, on investment demand. Panel (c) shows a movement along the same curve, either from A to B or from B to A, as a result of changes in interest rates.

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