Investment tax credit increases economic growth by:

Shifting the Production Possibility Curve (PPC) inward signifies a decrease in an economy's production capacity, typically due to a decline in resources or technological setbacks. An investment tax credit does not reduce capacity; rather, it promotes investment, which would shift the PPC outward, reflecting growth rather than contraction.

While an investment tax credit can contribute to shifting the Long-Run Aggregate Supply (LRAS) to the right over time by increasing productive capacity, the direct mechanism of promoting economic growth through an investment tax credit primarily involves increasing MPS. Thus, it is not the immediate or direct effect of the credit itself.

The Marginal Propensity to Consume (MPC) represents the portion of additional income that households spend on consumption. An investment tax credit does not lower MPC; instead, it can lead to higher income levels, which may affect consumption behavior but does not directly decrease MPC. In fact, higher investment may lead to increased disposable income, potentially raising MPC.