A higher real interest rate will
A)increase the profitability of new investment.
B)decrease lending of funds from firms to other economic agents.
C)reduce the desired investment of all firms.
D)reduce the desired investment of only those firms that have to borrow.

Question

Quizplus · Accepted Answer

A higher real interest rate increases the cost of borrowing, which generally reduces the desired investment of all firms, not just those that need to borrow.

A Higher Real Interest Rate Will