When the real interest rate falls,
A)the investment share will not be affected.
B)people will choose to consume more and investment will fall.
C)businesses are likely to decrease their purchases of new equipment and production facilities.
D)businesses are likely to increase their purchases of new equipment and production facilities.
E)people will choose to consume less and investment will fall.

Question

Quizplus · Accepted Answer

When the real interest rate falls, it becomes cheaper for businesses to borrow money to finance new investments. Therefore, businesses are likely to increase their purchases of new equipment and production facilities.

When the Real Interest Rate Falls