Final answer:
The variable that connects the market of money and goods through investment spending is the interest rate. It influences investment cost and decisions for businesses, which can be affected by a central bank's monetary policy tools.
Step-by-step explanation:
The variable that connects the market of money and the market of goods via investment spending is the interest rate. The interest rate plays a crucial role in influencing investment spending because it represents the cost of borrowing money. When interest rates are low, borrowing is cheaper, which can stimulate businesses to invest in new projects and expand operations. Conversely, high interest rates can discourage investment by making loans more expensive. In the context of monetary policy and macroeconomic variables, this interconnection is vital.
Monetary policy can affect interest rates and therefore influence investment spending. For example, when a central bank lowers the discount rate or decreases reserve requirements, it can lower domestic interest rates, potentially increasing investment spending.
Furthermore, the equation S (private savings) + (T - G) (taxes minus government spending) + (M - X) (imports minus exports) equals I (investment). This shows that for the macroeconomy, the quantity supplied of financial capital must be equal to the quantity demanded, and this quantity is influenced by interest rates.