Other things being equal,higher real interest rates tend to
A)increase every component of desired investment expenditure.
B)reduce every component of desired investment expenditure.
C)reduce every component of desired investment expenditure except residential housing.
D)reduce every component of desired investment expenditure except inventories.
E)reduce every component of desired investment expenditure except plant and equipment.

Question

Quizplus · Accepted Answer

Higher real interest rates increase the cost of borrowing money, thus reducing the amount of investment expenditure. This applies to all components of desired investment expenditure, as businesses have higher costs of borrowing for any type of investment, including residential housing, inventories, and plant and equipment.

Other Things Being Equal,higher Real Interest Rates Tend to