An increase in business confidence leads many firms to expand their factories, which causes the _____ capital to increase and interest rates to _____.

Question

Quizplus · Accepted Answer

An increase in business confidence leading to factory expansion increases the demand for capital as firms seek to invest more. This increased demand for capital typically leads to higher interest rates as the supply of capital is relatively fixed in the short term, making it more expensive to borrow money.

An Increase in Business Confidence Leads Many Firms to Expand