The investment-demand curve will shift to the right as the result of:
A)the availability of excess productive capacity.
B)an increase in business taxes.
C)businesses becoming more optimistic with respect to future business conditions.
D)an increase in the real interest rate.

Question

Quizplus · Accepted Answer

An increase in optimism among businesses regarding future business conditions would lead to an increase in investment demand, shifting the investment-demand curve to the right. A decrease in optimism would have the opposite effect. Excess productive capacity (choice A) would not affect the investment-demand curve, as it pertains to the willingness of businesses to invest and expand their operations rather than their ability to do so. An increase in business taxes (choice B) would reduce the profitability of investment, reducing the investment-demand curve. An increase in the real interest rate (choice D) would also reduce investment demand, as the cost of borrowing and investing would increase.

The Investment-Demand Curve Will Shift to the Right as the Result