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If businesses in general decide that they have overbuilt and so now have too much capital, their response to this would initially shift

User Xeno Lupus
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Final answer:

When businesses have too much capital, their response would initially result in a leftward shift in the supply curve for financial capital.

Step-by-step explanation:

When businesses in general decide that they have overbuilt and have too much capital, their response would initially result in a shift in the supply curve for financial capital. When businesses have excess capital, they are likely to reduce their borrowing and investment activities, which would reduce their demand for financial capital. This would cause a leftward shift in the supply curve for financial capital, indicating that businesses are willing to supply less capital at any given interest rate.

For example, during the Great Recession of 2008 and 2009, many businesses faced financial difficulties and reduced their investment activities. They became more cautious and restrained their spending, leading to a decrease in their demand for financial capital. As a result, the supply of financial capital shifted to the left.

Overall, when businesses have excess capital, their response would lead to a leftward shift in the supply curve for financial capital, indicating a decrease in their demand for capital.

User Varan Sinayee
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