In the Keynesian model, a decline in interest rates will cause investment to
A) increase.
B) decline.
C) remain unchanged.
D) move erratically, depending on the interest rate effect on saving.

Question

Quizplus · Accepted Answer

In the Keynesian model, a decline in interest rates reduces the cost of borrowing, which makes investment more attractive. Therefore, firms will increase their investment expenditures, leading to an increase in aggregate demand and economic growth.

In the Keynesian Model, a Decline in Interest Rates Will