The investment demand curve will shift to the right as the result of
A) the availability of excess production capacity.
B) an increase in business taxes.
C) businesses becoming more optimistic about future business conditions.
D) an increase in the real interest rate.

Question

Quizplus · Accepted Answer

Investment demand is influenced by business expectations about future business conditions. If businesses are optimistic about the future, they are more likely to invest in new projects and expand their operations, causing the investment demand curve to shift to the right. Excess production capacity or an increase in business taxes may influence investment decisions, but not necessarily increase investment demand. An increase in the real interest rate typically decreases investment demand, shifting the curve to the left.

The Investment Demand Curve Will Shift to the Right as the Result