A rise in the real rate of interest ________ the opportunity cost of holding an inventory of a given size,and therefore ________ desired investment expenditure.

Question

Quizplus · Accepted Answer

An increase in the real rate of interest increases the cost of holding an inventory of a given size (as it becomes more expensive to finance the inventory) and therefore decreases desired investment expenditure.

A Rise in the Real Rate of Interest ________ the Opportunity