The planned investment function will shift downward if
A)real disposable income increases.
B)the interest rate falls.
C)business expectations become more pessimistic.
D)the existing stock of capital decreases.

Question

Quizplus · Accepted Answer

Business expectations becoming more pessimistic will shift the planned investment function downward, as firms become less willing to invest in new capital goods and may even postpone or cancel existing investment plans. A decrease in real disposable income or the existing stock of capital would not directly affect the planned investment function, while a fall in the interest rate would typically lead to an upward shift, as it reduces the cost of borrowing and increases the potential return on investment.

The Planned Investment Function Will Shift Downward If