A) positive; interest rate and planned investment B) negative; interest rate and planned investment C) negative; interest rate and money demand D) inverse; price level and aggregate output

INTEREST RATE (Percent) Demand LOANABLE FUNDS (Billions of dollars) Supply Demand Supply ? Scenario 1: Suppose savers either buy bonds or make deposits in savings accounts at banks. Initially, the interest income earned on bonds or deposits is taxed at a rate of 18%. Now suppose there is an increase in the tax rate on interest income, from 18% to 22%.

Suppose that the graph below represents the market for financial capital in Palau. How does an increase in the budget deficit of Palau affect its equilibrium interest rate? Interest rate (%) Supply Demand Quantity of financial capital (% of GDP) The equilibrium interest rate increases since the supply curve for financial capital shifts to the left. The equilibrium interest rate decreases since the demand curve for financial capital shifts to the left. The equilibrium interest rate increases since the demand curve for financial capital shifts to the right. The equilibrium interest rate decreases since the supply curve for financial capital shifts to the right.

Determine whether the following statements are true or false:- a) If investors are optimistic about future earnings, they will not invest in the present in order to accumulate funds for investing in the future, which will lead to lower aggregate demand. b) The economic increase does not depend on investments, invested in human capital. c) Investment costs are more volatile than consumer expenditures, as they are influenced by changes in the interest rate and the expectations of entrepreneurs.