High interest rates make a firm's long-term investment in new capital

Question

Quizplus · Accepted Answer

High interest rates increase the cost of borrowing money for long-term investments, making them less attractive compared to short-term investments or other options. This is because the interest payments over time can significantly increase the total cost of a long-term investment, reducing the potential return on investment. Therefore, firms may hesitate to make long-term investments when interest rates are high.

High Interest Rates Make a Firm's Long-Term Investment in New