Final answer:
Planned investment spending depends on the market interest rate and expectations of future profits, with lower interest rates and higher expected profits encouraging more investment spending.
Step-by-step explanation:
Planned investment spending depends primarily on the market interest rate and expectations of future profits. Firms make investment decisions based on the potential for future earnings; when they anticipate economic growth and higher profits, they are more likely to invest. For instance, during the late 1990s economic boom in the U.S., investment surged as businesses expected greater profits. Conversely, investment declined when a recession began in 2001 as expectations dimmed.
Another significant influence on investment spending is the market interest rate. Lower interest rates decrease the cost of borrowing and the opportunity cost of using funds, thereby encouraging firms to invest in new capital. Higher interest rates have the opposite effect, making investments less attractive due to higher borrowing costs or opportunity costs.