Which of the following events could explain an increase in interest rates together with an increase in investment?
A)The government runs a larger deficit.
B)The government institutes an investment tax credit.
C)The government replaces the income tax with a consumption tax.
D)None of the above is correct.

Question

Quizplus · Accepted Answer

The government instituting an investment tax credit would incentivize investment, leading to an increase in investment. This increase in demand for investment funds would lead to an increase in interest rates.

Which of the Following Events Could Explain an Increase in Interest