Real domestic investment spending is:
A)positively related to the marginal propensity to consume.
B)negatively related to the level of interest rates in the economy.
C)positively related to government spending.
D)negatively related to the exchange rate.

Question

Quizplus · Accepted Answer

Real domestic investment spending is negatively related to the level of interest rates in the economy. When interest rates are high, it becomes more expensive for businesses to borrow money to invest, which reduces investment spending. Conversely, when interest rates are low, it becomes cheaper for businesses to borrow money to invest, which increases investment spending. Therefore, the level of interest rates has a significant impact on real domestic investment spending.

Real Domestic Investment Spending Is