"An increase in the real interest rate increases the quantity of investment." Is the previous statement correct or incorrect?
What will be an ideal response?
The statement is false. The interest rate is the opportunity cost of the funds used to make an investment. Hence an increase in the interest rate decreases the quantity of investment demanded.
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Suppose that a haircut in your hometown costs $20, while the price for the same haircut in Mumbai is 600 Indian rupees. At which nominal exchange rate is the dollar price lower for the Mumbai haircut?
A) 0.029$/Rs. B) 20Rs./$ C) 25Rs./$ D) 0.04$/Rs.
Which of the following is a method of reducing the poverty trap?
a. Imposing requirements for work as a condition of receiving benefits b. Ensuring that government benefits are increased gradually over time c. Reducing government benefits by an amount equal to income earned d. Providing a guaranteed minimum income for all needy recipients