East ECON 4214 - Investment funds can be allocated
9. Investment funds can be allocated to the Corporate sector and the Non-Corporate sector. The graph below shows the equilibria in the investment market of the Corporate sector before and after a corporate income tax. Draw a demand and supply graph of the investment market for the Non-Corporate sector on the right.
The equilibrium return rate in the Corporate sector will (increase or decrease) There is a (demand/supply, increase/decrease) of investment funds in the Non-Corporate sector.
- The equilibrium return rate in the Non-Corporate sector will (increase or decrease)?
- Mark the equilibrium return rate of the Non-Corporate sector before the tax. Shift the demand or Supply curve and mark the new equilibrium return rate.