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Suppose Congress instituted a subsidy program that provided reduced taxes if a company were to invest in its own infrastructure (new machinery, vehicles, etc).

What would happen in the loanable funds market?

A

Real interest rates fall, quantity of loans increase.

B

Real interest rates rise, quantity of loans increase.

C

Real interest rates rise, quantity of loans decrease.

D

Real interest rates fall; quantity of loans decrease.

E

Stasis: No shift of either curve; just a quantity change.

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