What would happen in the market for loanable funds if the government were to decrease the tax rate on interest income?
a. The supply of loanable funds would shift rightward and investment would increase.
b. The supply of loanable funds would shift leftward and investment would decrease.
c. The demand for loanable funds would shift rightward and investment would increase.
d. The demand for loanable funds would shift leftward and investment would decrease.
a
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Explain the relationship between the real interest rate and investment demand. Compare that relationship to the relationship between expected profit and investment demand
What will be an ideal response?
How does monopoly product quality compare to the quality a social planner would choose? a. The monopolist targets the marginal consumer's valuation of quality, whereas the social planner targets the average consumer's. This leads the monopolist to make inefficiently low-quality products. b. The monopolist targets the marginal consumer's valuation of quality, whereas the social planner targets
the average consumer's. This leads the monopolist to make inefficiently high-quality products. c. There is no difference due to a standard neutrality argument. d. None of the above.