An investment demand curve shows the varying amounts of investment that would be undertaken at various levels of:
A) The average price in the economy
B) Consumer spending
C) Personal saving
D) The real interest rate

Question

Quizplus · Accepted Answer

The investment demand curve shows the relationship between the real interest rate and the level of investment. As the real interest rate decreases, firms find it cheaper to borrow money to invest in new projects, leading to an increase in investment. Conversely, as the real interest rate increases, the cost of borrowing money to invest in new projects increases, resulting in a decrease in investment. Therefore, the correct answer is D, the real interest rate.

An Investment Demand Curve Shows the Varying Amounts of Investment