If the interest rate increases, investment will
A) decrease.
B) increase.
C) not be affected.
D) fall to zero.

Name: If the interest rate increases, investment will A) decrease. B) increase. C) not be affected. D) fall to zero.
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Question

Quizplus · Accepted Answer

When the interest rate increases, the cost of borrowing money goes up. As a result, it becomes more expensive for businesses to invest in capital projects, and they may delay or reduce their investment plans. Therefore, investment tends to decrease when interest rates increase.

If the Interest Rate Increases, Investment Will