Inventory investment will decrease when interest rates _____ and credit conditions are _____.
A) decrease; tight
B) decrease; easy
C) increase; easy
D) increase; tight

Question

Quizplus · Accepted Answer

Inventory investment tends to decrease when interest rates increase because the cost of borrowing money to finance inventory becomes more expensive. Additionally, when credit conditions are tight, it is harder for businesses to obtain financing, further discouraging inventory investment.

Inventory Investment Will Decrease When Interest Rates _____ and Credit