An investment tax credit:

Question

Quizplus · Accepted Answer

An investment tax credit would encourage investment and increase the demand for loanable funds, thus shifting the demand curve for loanable funds to the right. However, it may also lead to an increase in interest rates due to the increased demand for funds. Therefore, option B is the best choice. Option A is incorrect because an investment tax credit does not reduce the supply of loanable funds. Option C is incorrect because it may affect interest rates. Option D is incorrect because an investment tax credit is more likely to increase interest rates than lower them.

An Investment Tax Credit