demand for capital has increased over the last year (the demand curve shifted to

Question

demand for capital has increased over the last year (the demand curve shifted to the right) Place the black X at the equilibrium interest rate and the quantity of capital The folowing graph shows the supply of and demand for capital in a market over the last year. You can see that the INTEREST RATE? 16 CAPITAL 1ons of dollars The market interest rote increased by 2.0%, and the amount or capital borrowed Does i t appear that the economy has strongthened or wwoakened over the pest year? 4 caps lock

Explanation / Answer

As we can see equillibrium will be at point where the graphs intersect.
Initial the graphs were intersecting at $8 billion capital and 10% interest rates
Now the graphs intersect at 12 billion capital and 12% interest rates.

Hence the capital borrowed increased by $12-$8=$4 billion

This means that economcy has strenghthened over the past year as capital required has increased.

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