princess buttercup has granted an investment tax credit in florin. how will the market for loanable funds be…

princess buttercup has granted an investment tax credit in florin. how will the market for loanable funds be impacted and what will the effect be on the interest rate? choose 1 answer: a both the supply and demand for loanable funds will increase; the effect on the interest rate is indeterminate b the supply of loanable funds will decrease; the interest rate will not change c the supply of loanable funds will increase; the interest rate will decrease d the demand for loanable funds will increase; the interest rate will increase e the demand for loanable funds will decrease; the interest rate will not change

princess buttercup has granted an investment tax credit in florin. how will the market for loanable funds be impacted and what will the effect be on the interest rate? choose 1 answer: a both the supply and demand for loanable funds will increase; the effect on the interest rate is indeterminate b the supply of loanable funds will decrease; the interest rate will not change c the supply of loanable funds will increase; the interest rate will decrease d the demand for loanable funds will increase; the interest rate will increase e the demand for loanable funds will decrease; the interest rate will not change

Answer

Brief Explanations:

An investment - tax credit encourages businesses to invest more. When businesses want to invest more, they demand more loanable funds. An increase in the demand for loanable funds, with the supply remaining unchanged (in the short - run analysis here), will cause the interest rate to rise. The supply of loanable funds is not directly affected by the investment tax credit in this basic analysis.

Answer:

D. The demand for loanable funds will increase; the interest rate will increase