Question

A rise in the interest rate

decreases the opportunity cost of investing.
		increases firms' desires to invest.
		increases the opportunity cost of investing.
		None of these

Answer 1

Opportunity cost is defined as the best alternative forgone in order to get one additional unit of any good.

Now, when the rate of interest increases then investment will decreases. As, there exists inverse relationship between investment and rate of interest.

Hence, if any producer wants to invest then he /she has to forgone the returns from high rate of interest.

So, option C is correct that is when rate of interest rises then it increases the oppurtunity cost of investing.