The investment demand curve shows the amount businesses spend for investment goods at different possible:
A) price levels.
B) levels of GDP.
C) rates of interest.
D) levels of taxation.

Question

Quizplus · Accepted Answer

The investment demand curve shows the relationship between the interest rate and the amount of investment spending. As interest rates decrease, the cost of borrowing money for investment decreases, making investment more attractive and increasing the quantity demanded. As interest rates increase, the cost of borrowing money for investment increases, making investment less attractive and decreasing the quantity demanded. Therefore, the investment demand curve is based on rates of interest, not price levels, levels of GDP, or levels of taxation.

The Investment Demand Curve Shows the Amount Businesses Spend for Investment