As the real interest rate ________, the real investment spending ________.

Question

Quizplus · Accepted Answer

According to the loanable funds theory, as real interest rates increase, the cost of borrowing money increases, leading to a decrease in investment spending. Conversely, as real interest rates decrease, the cost of borrowing money decreases, making investment spending more attractive and leading to an increase in investment spending. Therefore, as the real interest rate increases, the real investment spending decreases.

As the Real Interest Rate ________, the Real Investment Spending