The figure given below shows the demand [D and D'] and supply [S and S'] curves of shares of stock.Figure 17.2

-A decline in the interest rate will lead to an increase in the price of capital, supply of capital remaining constant.

Question

The figure given below shows the demand [D and D'] and supply [S and S'] curves of shares of stock.Figure 17.2
 
-A decline in the interest rate will lead to an increase in the price of capital, supply of capital remaining constant.

Quizplus · Accepted Answer

A decline in the interest rate reduces the cost of borrowing, making it cheaper for businesses and individuals to finance capital investments. This increased demand for capital, with supply remaining constant, leads to an increase in the price of capital.

The Figure Given Below Shows the Demand [D and D']