A decrease in the rate of interest, other things being equal, will cause a:
A) rightward shift of the investment demand curve.
B) movement upward along the investment demand curve.
C) movement downward along the investment demand curve.
D) leftward shift of the investment demand curve.

Question

Quizplus · Accepted Answer

A decrease in the rate of interest, other things being equal, will make investment less expensive and more profitable, thus increasing the quantity of investment demanded. This will lead to a movement downward along the investment demand curve, not a shift. Therefore, the correct answer is C.

A Decrease in the Rate of Interest, Other Things Being