2. The market for capital

The following graph shows the supply of and demand for capital in a market over the last year. You can see that the demand for capital has increased over the last year (the demand curve shifted to the right). Place the black X at the equilibrium interest rate and the quantity of capital.

Equilibrium0246810121416182020181614121086420INTEREST RATE, r (Percent)CAPITAL (Billions of dollars)D1D2S

The market interest rate increased by 2.0%, and the amount of capital borrowed by billion.

Does it appear that the economy has strengthened or weakened over the past year?

Strengthened

Weakened