The investment demand function would shift for all of the following reasons except:
A) an improvement in technology raises the marginal product of capital.
B) an increase in population raises the demand for housing.
C) an increase in government spending raises the real interest rate.
D) the investment tax credit is reinstated.

Question

Quizplus · Accepted Answer

An increase in government spending should not raise the real interest rate, but rather increase the demand for investment goods, shifting the investment demand function to the right. The other options are valid reasons for a shift in the investment demand function.

The Investment Demand Function Would Shift for All of the Following