What happens to the investment line if the real interest rate increases?
A)There is a movement up and to the left along the same investment line.
B)There is a movement down and to the right along the same investment line.
C)The investment line shifts to the right.
D)The investment line shifts to the left.

Question

Quizplus · Accepted Answer

When the real interest rate increases, the cost of borrowing becomes higher, leading to a decrease in investment. This results in a movement up and to the left along the same investment line, as fewer investments are undertaken at higher interest rates.

What Happens to the Investment Line If the Real Interest