Which of the following would increase the level of planned real investment?
A) an increase in the interest rate
B) an expectation of higher future profits
C) an expectation of higher future costs
D) an increase in business taxes

Question

Quizplus · Accepted Answer

Expectations of higher future profits would encourage firms to invest more, leading to an increase in planned real investment. A higher interest rate would increase the cost of borrowing for firms, leading to a decrease in planned real investment. Expectations of higher future costs would also lead firms to curtail investment. An increase in business taxes would decrease after-tax profits, leading to a decrease in planned real investment.

Which of the Following Would Increase the Level of Planned