A rise in the real interest rate, everything else remaining unchanged, will cause business investment spending to
A)decline.
B)not change.
C)rise.
D)rise at first, then decline later.

Question

Quizplus · Accepted Answer

When the real interest rate rises, it becomes more expensive for businesses to borrow money to finance investment projects. As a result, businesses may choose to postpone or cancel investment projects, leading to a decline in investment spending.

A Rise in the Real Interest Rate, Everything Else Remaining