In an economy,investment is most likely to be dependent on ________.
A) the short-term real interest rate
B) the long-term real interest rate
C) the short-term nominal interest rate
D) the long-term nominal interest rate

Question

Quizplus · Accepted Answer

Investment decisions typically involve commitments of resources over a considerable period of time, and therefore long-term real interest rates are more relevant to investment decisions than short-term rates. Nominal interest rates do not take into account changes in inflation, whereas real interest rates do. Therefore, investment decisions are more sensitive to changes in long-term real interest rates.

In an Economy,investment Is Most Likely to Be Dependent on ________