CONNECT F/MICROECONOMICS
21st Edition
ISBN: 2810022151240
Author: McConnell
Publisher: MCG
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Question
Chapter 18, Problem 7DQ
To determine
Economic functions of the interest rate.
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The Atlantic Investment Tax Credit is a 10% tax credit
available to businesses that make specific investments in
the Atlantic region and the Gaspe Peninsula. The graph
shows the market for loanable funds.
Show the impact of this tax credit by moving the proper
curve appropriately in the graph.
The new equilibrium interest rate is
The quantity of loanable funds is $
1
Incorrect
5
Incorrect
I
billion
Which statement accurately describes the impact of
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%
Firms find that more investments are profitable and
increase their demand for loanable funds. As a
result, the interest rate rises.
Interest rate (%)
10
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3
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0
0
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Quantity of loanable funds (in billions)
40
Supply
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Demand
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Manipulate the graph to show what will happen to supply and
demand in the market for loanable funds when the
government budget deficit increases, changing the
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Ceteris paribus, what is the new interest rate?
interest rate:
Ceteris paribus, private investment would
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not change.
decrease.
%
20
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9
Supply
8
Interest rate (%)
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Quantity of loanable funds (% of GDP)
QUESTION 19
You lend your sister's daughter $2,000 for a year, if at the end of the year she pays you $2,180. The interest rate you are charging her is
O 1.1%.
O 9%.
O 10%.
O 20%.
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