Suppose a poor country decides to institute an investment tax credit. As a result, which of the following is most likely to happen?
A)Interest rates would rise, and investment would fall.
B)Interest rates would fall, and investment would rise.
C)Both interest rates and investment would fall.
D)Both interest rates and investment would rise.

Question

Quizplus · Accepted Answer

An investment tax credit encourages firms to invest more by reducing their tax burden on new investments, leading to increased demand for funds. This increased demand for funds typically causes interest rates to rise.

Suppose a Poor Country Decides to Institute an Investment Tax