-Refer to Figure 9-3.An investment tax credit that increases the demand for loanable funds from D₁ to D₂ will increase investment spending by

Question

Quizplus · Accepted Answer

An investment tax credit increases the demand for loanable funds, which shifts the demand curve to the right. This results in an increase in both the equilibrium quantity of loanable funds (investment spending) and the equilibrium interest rate. The specific amounts ($100 billion and 2 percentage points) cannot be determined without the figure, but this option correctly describes the direction of change for both variables.