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Whenever rate of interest increases real investment will decrease but financial investment will increase. True/False? Explain...

Whenever rate of interest increases real investment will decrease but financial investment will increase. True/False? Explain your answer.

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Answer #1

whenever the rate of interest will increase th,e real investment will decrease but the financial investment will be increasing, because when there would be an increase in the rate of interest, investors will not be purchasing real assets like the land and the building because they will be highly costly in nature whereas buying in the financial assets will mean that people will be going in line with the economy by going bullish on the demands so the pricing of these shares will be appreciated.so it can be said that when the interest rate is decreasing the investment of financial asset will be increasing whereas investment in real assets will be decreasing.

The given statement is hence TRUE.

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