Which of the following is likely to reduce investment and,as a result,reduce aggregate demand?
A)higher real interest rates
B)a decrease in inventories
C)decreased business taxes
D)optimistic business forecasts

Question

Quizplus · Accepted Answer

Higher real interest rates would make borrowing more expensive, which would discourage investment and thus reduce aggregate demand. Decrease in inventories (B) could actually increase investment and aggregate demand as businesses would need to restock their inventories. Decreased business taxes (C) could also encourage investment and increase aggregate demand. Optimistic business forecasts (D) may increase investment, but it is uncertain and could depend on other factors.

Which of the Following Is Likely to Reduce Investment And,as