Other things equal, an increase in the real interest rate leads to a. a decrease in...
Other things equal, an increase in the real interest rate leads to
|
a. |
a decrease in the quantity of investment goods demanded |
|
b. |
an increase in the quantity of investment goods demanded |
|
c. |
no change in the quantity of investment goods |
|
d. |
either an increase or a decrease in the quantity of investment goods demanded depending on the initial amount of investment. |
Homework Answers
a. a decrease in the quantity of investment goods demanded.
Increase in real interest rate increases the interest burden for general public so now they are willing to invest less in the purchase of investment goods which they initially do from bank borrowings.
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Other things equal, an increase in the real interest rate leads
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