The investment demand slopes downward and to the right because lower real interest rates
A) expand consumer borrowing, making investments more proﬁtable.
B) boost expected rates of returns on investment.
C) enable more investment projects to be undertaken proﬁtably.
D) create tax incentives to invest.

Question

Quizplus · Accepted Answer

Lower real interest rates decrease the cost of borrowing, making it less expensive for businesses to undertake investment projects. This leads to an increase in the number of investment projects that are undertaken profitably and expansion of the investment demand. Hence, option C is correct while the rest of the options are incorrect.

The Investment Demand Slopes Downward and to the Right Because