Changes in real planned investment spending have
A) a direct relationship to changes in interest rates.
B) an inverse relationship to changes in the interest rate.
C) no identifiable relationship to changes in the interest rate.
D) a direct relationship to changes in the level of household savings.

Question

Quizplus · Accepted Answer

Real planned investment spending tends to have an inverse relationship to changes in the interest rate. When interest rates increase, the cost of borrowing money to invest in capital projects rises, leading to a decrease in investment spending. Conversely, when interest rates decrease, the cost of borrowing money to invest in capital projects falls, incentivizing increased investment spending.

Changes in Real Planned Investment Spending Have