When the interest rate is low, planned investment is ________ so output is ________.
A) high; high
B) high; low
C) low; high
D) low; low

Question

Quizplus · Accepted Answer

When the interest rate is low, firms are incentivized to invest more as the cost of borrowing is cheaper. This leads to an increase in planned investment, which in turn boosts output. Thus, when the interest rate is low, both planned investment and output are high.

When the Interest Rate Is Low, Planned Investment Is ________