Question

How will planned investment spending change as the following event occurs? The interest rate falls as...

How will planned investment spending change as the following event occurs? The interest rate falls as a result of Federal Reserve policy

A.) Planned investment spending will not change.

B.)Planned investment spending will decrease.

C.)Planned investment spending will increase

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Answer #1

As we know that there is a negative relationship between investment and rate of interest. When rate of interest increases than planned investment decreases and when the rate of interest is low people will borrow more and the planned investment will increase.
So we can conclude that when rate of interest falls as a result of federal reserve policy , the planned investment spending will increase.

C.)Planned investment spending will increase

Hope you got your answer if you need some more information about your question feel free to ask. Thank you

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