If the expected rate of return on investment decreases, then most likely the:
A) Investment schedule will shift upward
B) Investment schedule will shift downward
C) Consumption schedule will shift upward
D) Consumption schedule will shift downward

Question

Quizplus · Accepted Answer

A decrease in the expected rate of return on investment would make investment less attractive, leading firms to decrease their planned investment spending. As a result, the investment schedule (which shows planned investment spending at different interest rates) will shift downward. The consumption schedule, which shows planned consumption spending at different levels of income, is not directly affected by changes in the expected rate of return on investment.

If the Expected Rate of Return on Investment Decreases, Then