Question

With an increase in interest rates,

A. capital investment decreases, decreasing economic growth.

B. investment spending decreases, decreasing economic growth.

C. capital investment increases, increasing economic growth.

D. investment spending increase, increasing economic growth.

E. capital investment increases, decreasing economic growth.

Answer 1

E. capital investment increases, decreasing economic growth. People invest more and spend less with higher interest rates. As interest rates increase economic growth decreases.