Other things equal, the real interest rate and the level of investment are:
A)related only when saving equals planned investment.
B)unrelated.
C)inversely related.
D)directly related.

Question

Quizplus · Accepted Answer

The real interest rate and investment are inversely related due to the cost of borrowing money to invest. As the real interest rate increases, the cost of borrowing money to invest increases, which reduces the level of investment. Conversely, as the real interest rate decreases, the cost of borrowing money to invest decreases, which increases the level of investment.

Other Things Equal, the Real Interest Rate and the Level