Show on the graph how each of the following events changes the equilibrium interest rate by shifting the relevant curve(s). a. The president signs a tax cut into law. Interest rate 10 40 N 40 n + 2 1 D x 100 300 400 e 500 600 700 800 900 1,000 Loanable funds

Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
ChapterST1: Government Spending And Taxation
Section: Chapter Questions
Problem 2CQ
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Show on the graph how each of the following events changes the equilibrium interest rate by shifting the relevant curve(s).
a. The president signs a tax cut into law.
b. An engineering advance induces many firms to upgrade
their computer systems.
c. Congress repeals an investment tax credit and
uses the revenue to reduce other taxes.
d. A flu pandemic induces consumers to stay at home rather
than go shopping.
Interest rate
Interest rate
Interest rate
10
8
2
11
10
8
7
11
10:
2
11
D 100 200
10
D 100 200
300 400 500 600
Lounable funds
700
S
D
800 900 1,000
S
D
300 400 500 600 700 800 900 1,000
Loanable funds
S
D
D 100 200 300 400 500 600 700 800 900 1,000
Loanable funds
S
Transcribed Image Text:Show on the graph how each of the following events changes the equilibrium interest rate by shifting the relevant curve(s). a. The president signs a tax cut into law. b. An engineering advance induces many firms to upgrade their computer systems. c. Congress repeals an investment tax credit and uses the revenue to reduce other taxes. d. A flu pandemic induces consumers to stay at home rather than go shopping. Interest rate Interest rate Interest rate 10 8 2 11 10 8 7 11 10: 2 11 D 100 200 10 D 100 200 300 400 500 600 Lounable funds 700 S D 800 900 1,000 S D 300 400 500 600 700 800 900 1,000 Loanable funds S D D 100 200 300 400 500 600 700 800 900 1,000 Loanable funds S
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