Of all of the interest-sensitive component parts of aggregate expenditures, the most important component is:
A)Investment
B)Government purchases
C)Consumption
D)Net exports

Question

Quizplus · Accepted Answer

Investment is the most interest-sensitive component of aggregate expenditures because it involves decisions about long-term capital expenditures that can be postponed or canceled in response to changes in interest rates. The higher the interest rates, the less likely businesses are to invest in new plants, equipment, or other capital goods, which can lead to a decrease in aggregate demand and slow economic growth.

Of All of the Interest-Sensitive Component Parts of Aggregate Expenditures