The Atlantic Investment. Tax Credit Tax Credit is a 10 percentage tax credit ava
ID: 1217646 • Letter: T
Question
The Atlantic Investment. Tax Credit Tax Credit is a 10 percentage tax credit available to businesses that make specific investments in the Atlantic region and the Gaspe peninsula. The Graph below shows the market for loanable funds. Show the impact of this tax credit by moving the proper curve appropriately in the graph below. which of the following accurately describes the impact of the Atlantic investment. Tax Credit? Firms find more investments are profitable and increase their supply loanable funds. As a result, the interest rate rises. Firms find more investments are unprofitable and decrease their supply loanable funds. As a result, the interest rate falls. Firms find more investments are profitable and decrease their demand for loanable funds. As a result, the interest rate falls. Firms find more investments are profitable and increase their demand for loanable funds. As a result, the interest rate rises.Explanation / Answer
Answer is option D.
Tax credit is an incentive provided by the government. This reduces the actual amount of tax they owed. Therefore, 10% tax credit provided more incentive to invest. Therefore, increase in the demand for investment (as it is more profitable) which will raise the rate of interest.
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