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Question 1 (1 point) If interest rates increase, how wil his affet planned investment? Planned investment will decrease. Plan
Question 3 (1 point) If interest rates increase, how will this affect consumption? Consumption could increase or decrease. Co
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Answer #1

1. Planned investment will decrease.

Due to rise in interest rates profits are lowered and hence investments (planned) decreases and vice versa. Planned investment spending is a negative function of the interest rate.

2. Industries selling durable goods.

Consumers have little confidence in the economy during recession posing a higher risk to the demand for durable goods, consequently their demand decreases.

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