Question

g An increase in the interest rate: has no effect on investment. may be caused by a drop in investment demand. increases planned investment because people who make money from interest have more money to invest. reduces planned investment because the interest rate is the cost of borrowing to finance investment projects.

Answer 1

reduces planned investment because the interest rate is the cost of borrowing to finance investment projects.

Step-by-step explanation:

There is an inverse relationship between interest rate and planned investment.

The higher interest rate is, the lower planned investment. This is because interest rate is the cost of borrowing. An higher interest rate means the cost of borrowing would increase.

On the other hand, a lower interest rate increases planned investment. This is because a lower interest rate means that the cost of borrowing would reduce.