A _______ relationship exists between the real interest rate and investment spending.
A) negative
B) positive
C) limited
D) constant

Question

Quizplus · Accepted Answer

As the real interest rate increases, investment spending decreases as the cost of borrowing becomes more expensive. Conversely, as the real interest rate decreases, investment spending increases as the cost of borrowing becomes less expensive. This inverse relationship between interest rates and investment spending is a fundamental concept in macroeconomics.

A _______ Relationship Exists Between the Real Interest Rate and Investment