Question

What is the relationship between interest rates and the demand for investment goods in any time period? You should be able to explain this relationship, that is, why it exists

Answer 1

There is an inverse relationship betwee interest rates and demand for investment goods. This is because interest rate is opportunity cost of holding money and investing it in investment goods. If it is increased, a larger sum is now required to be paid as interest which discourages investment. A lower opportunity cost allows investors to invest more because now money is saved. Hence there is an inverse  relationship between interest rates and the demand for investment goods in any time period