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Capital and Interest

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Solution Preview

We examine the first scenario.
An outward shift in the demand curve for capital occurs when at the same interest rates more capital is demanded. An outward shift in demand curve for capital also means that at the same capital invested a higher rate of interest is charged. This happens because of increased demand for capital. When a boom occurs there is increased economic activity. There is also an increased construction of plants, ...

Solution Summary

The answer to this problem explains the first scenario in the question. The references related to the answer are also included.