In the Keynesian model, planned investment is
A) negatively related to the interest rate.
B) negatively related to the level of income.
C) positively related to the wage rate.
D) positively related to household consumption.

Question

Quizplus · Accepted Answer

In the Keynesian model, planned investment is negatively related to the interest rate. This is because as the interest rate increases, it becomes more expensive for firms to borrow money to finance investment projects, leading to a decrease in planned investment. Conversely, when interest rates are low, it is cheaper for firms to borrow money and invest, leading to an increase in planned investment.

In the Keynesian Model, Planned Investment Is