According to the classical model, investment
A) is a function of real GDP.
B) is a function of the nominal GDP.
C) is inversely related to the interest rate.
D) is influenced by the money illusion at low income levels.

Question

Quizplus · Accepted Answer

Investment, according to the classical model, is inversely related to the interest rate. Lower interest rates make borrowing cheaper, encouraging more investment, while higher rates do the opposite.

According to the Classical Model, Investment