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Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383

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BuyFindarrow_forward

Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383
Textbook Problem

What do interest rates and the tax treatment of returns to capital have to do with economic growth?

To determine

Role of interest rates and tax treatment of returns to capital in economic growth.

Explanation

The amount of capital availability mainly depends upon the change in interest rates and tax treatment of capital returns. Firms usually borrow money for purchasing of capital. When the rate of interest reduces, firms are enhanced to borrow more funds. This leads to employ more capital, which increases production and shifts the production function rightward. Thus, the LRAS curve also shifts in the same direction...

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