Which of the following will shift the investment demand curve rightward?
A) higher interest rates
B) gloomy sales expectations
C) a cut in corporate taxes that raises after-tax profits
D) a decrease in the marginal propensity to consume
E) an increase in aggregate income

Question

Quizplus · Accepted Answer

A cut in corporate taxes that raises after-tax profits would increase companies' incentive to invest, resulting in an increase in investment demand, and thus, a rightward shift of the investment demand curve. Higher interest rates and gloomy sales expectations would have the opposite effect and shift the curve leftward, while a decrease in the marginal propensity to consume would affect the consumption demand curve, not the investment demand curve. An increase in aggregate income would also affect the consumption demand curve, but may not necessarily shift the investment demand curve.

Which of the Following Will Shift the Investment Demand Curve