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Economics
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The investment demand curve portrays an inverse negative relationship between

A. the level of investment spending and real GDP.

B. the nominal interest rate and the level of investment spending.

C. the real interest rate and the level of investment spending.

D.the price level and the level of investment spending.

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Kristelle Balando
Kristelle BalandoLv10
14 Sep 2020
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Related questions

According to the interest-rate-based monetary policy transmission mechanism, an increase in the money supply generates:

a. lower interest rates, which causes an increase in planned real investment spending and an increase in aggregate demand.

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c. an increase in nominal GDP and a change in the price level, but no change in real GDP.

d. an increase in aggregate supply since the supply of money is part of aggregate supply.

Business investment spending represents spending by businesses on new plants, factories, equipment, technologies, etc. According to economic theory, the primary determinant of the level of business investment spending is the level of real interest rates. The Federal Reserve in 2008 reduced interest rates effectively to zero. Business investment spending, however, collapsed, declining as much as 25% annually over the next two years. How would you resolve this seeming paradox of rock-bottom interest rates and a collapse in business investment spending? Please briefly explain.

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