Two basic determinants of investment spending are:
A) Consumer spending and government spending
B) Expected returns and real interest rates
C) General price level and the level of output
D) Domestic trade and international trade

Question

Quizplus · Accepted Answer

Expected returns and real interest rates are the two basic determinants of investment spending. Expected returns reflect the profit that businesses anticipate earning on their investment, while real interest rates indicate the cost of borrowing money to finance investment. When expected returns are high and real interest rates are low, businesses are more likely to invest because they anticipate earning a good return on their investment while the cost of borrowing is relatively low.

Two Basic Determinants of Investment Spending Are