Suppose the Fed changes the interest rate in an attempt to raise planned investment.But in spite of this,planned investment remains unchanged.The most likely explanation is that
A)we have moved downward along an unchanged rate-of-return line.
B)we have moved upward along an unchanged rate-of-return line.
C)the rate-of-return line has shifted to the left.
D)the rate-of-return line has shifted to the right.

Question

Quizplus · Accepted Answer

The most likely explanation for planned investment remaining unchanged despite the Fed changing the interest rate is that the rate-of-return line has shifted to the left. This shift would counteract the effects of the interest rate change, keeping planned investment at its previous level.

Suppose the Fed Changes the Interest Rate in an Attempt