The government removes an existing investment tax credit. Which input in the production function changes, and what is the effect on economic growth in the country?

Question

Quizplus · Accepted Answer

The investment tax credit was providing an incentive for firms to invest in capital goods, thus increasing the capital stock. Without the credit, firms may decrease their investment in capital goods, leading to a decrease in the capital stock and a negative impact on economic growth.

The Government Removes an Existing Investment Tax Credit