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The Demand for Capital Is QD = 80 - 15r

question 17

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The demand for capital is QD = 80 - 15r and the supply of capital is QS = 20r - 60, where r is the interest rate and Q is the quantity of capital in millions of dollars. Businesses become more optimistic about the business environment and borrow $70 million more capital at each interest rate level. What happens to the equilibrium interest rate and quantity of capital as a result of this newfound optimism?


Definitions:

Tax Base

The aggregated economic value that is subject to taxation by a governing authority, which helps fund public expenditures.

Business Districts

Areas within a city where the main commercial activities are concentrated, including offices, retail shops, and service providers.

Prime Farmland

Land that is highly suitable for agriculture due to its fertility and ability to sustain long-term crop production.

Urban Sprawl

The uncontrolled expansion of urban areas into the surrounding countryside, often characterized by low-density residential and commercial development.

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