Private sector investment is usually done through borrowing.The economic variable that influences the level of investment is the

Question

Quizplus · Accepted Answer

The real interest rate is the cost of borrowing for firms, and therefore it is the economic variable that directly influences the level of private sector investment. As the real interest rate increases, borrowing becomes more expensive, which typically leads to a decrease in investment. Inflation rate, per capita GDP, and employment rate, while important economic variables, do not have as direct an impact on investment as the real interest rate.

Private Sector Investment Is Usually Done Through Borrowing