Which of the following could be a direct cause of investment spending decreasing?
A) Real income increases.
B) Real interest rates increase.
C) A firms revenues increases while their costs remain constant.
D) Expected future income increases.

Question

Quizplus · Accepted Answer

When real interest rates increase, it becomes more expensive for firms to borrow money to finance their investments, so they may choose to decrease investment spending. Real income increasing, a firm's revenue increasing while costs remain constant, or expected future income increasing would not directly cause a decrease in investment spending.

Which of the Following Could Be a Direct Cause of Investment