During an economic slump, policies that lower interest rates may not actually boost investment because
A) lower interest rates tend to discourage investment, all other things unchanged.
B) investment is never affected by interest rate changes.
C) of pessimistic expectations by businesses about the future of the economy.
D) taxes may have been decreased during a recessionary period.

Question

Quizplus · Accepted Answer

During a period of economic slump, businesses may be pessimistic about the future of the economy and therefore may not be willing to invest even if interest rates are lowered. This is because they may not see sufficient demand for their products or services in the future to justify the cost of investment.

During an Economic Slump, Policies That Lower Interest Rates May