The demand curve for investment depicts:
A)an inverse relationship between interest rate and aggregate demand.
B)an inverse relationship between interest rate and investment.
C)an inverse relationship between price level and real GDP.
D)a direct relationship between interest rate and quantity of money.
E)a direct relationship between aggregate demand and real GDP.

Question

Quizplus · Accepted Answer

The demand curve for investment shows the inverse relationship between the interest rate and investment. As interest rates rise, the cost of borrowing increases, making investment more expensive and reducing the quantity of investment demanded. Conversely, as interest rates fall, investment becomes cheaper, and the quantity of investment demanded increases.

The Demand Curve for Investment Depicts