A key determinant of investment is
A) the expected rate of future total factor productivity.
B) the level of economic activity.
C) the level of government spending.
D) the potential for exports.
E) the real interest rate.

Question

Quizplus · Accepted Answer

The real interest rate is the cost of borrowing money and is a key determinant of investment decisions. When the real interest rate is high, it becomes more expensive to borrow money and invest in capital projects, which can deter businesses from making investment decisions. On the other hand, when the real interest rate is low, the cost of borrowing money is lower and businesses may be more willing to invest in capital projects, which can lead to higher levels of investment.

A Key Determinant of Investment Is