"The Demand Curve for Capital", which shows the quantity of capital firms intend to hold at each interest rate, is downward-sloping At point A, we see that at an interest rate of 10%, $8 trillion worth of capital is demanded in the economy At point B, a reduction in the interest rate to 7% increases the quantity of capital demanded to $9 trillion At point C, at an interest rate of 4%, the quantity of capital demanded is $10 trillion A reduction in the interest rate increases the quantity of capital demanded Figure 13.2 The Demand Curve for Capital The quantity of capital firms will want to hold depends on the interest rate The higher the interest rate, the less capital firms will want to hold The demand curve for capital for the economy is found by summing the demand curves of all holders of capital Ms Stein’s demand curve, for example, might show that at an interest rate of 8%, she will demand the capital she already has—suppose it is $600,000 worth of equipment If the interest rate drops to 7%, she will add the tractor; the quantity of capital she demands rises to $695,000 At interest rates greater than 8%, she Attributed to Libby Rittenberg and Timothy Tregarthen Saylor URL: http://www.saylor.org/books/ Saylor.org 694