Holding other factors constant, a fall in the interest rate will ______ inventory investment.
A) increase
B) decrease
C) have no impact on
D) sometimes increase and sometimes decrease

Question

Quizplus · Accepted Answer

When interest rates fall, the cost of borrowing decreases, making it easier and cheaper for firms to obtain financing for inventory investment. This leads to an increase in inventory investment.

Holding Other Factors Constant, a Fall in the Interest Rate