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Author Question: Explain how a decrease in the interest rate will affect ... (Read 27 times)

charchew

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on: Jun 30, 2018
Explain how a decrease in the interest rate will affect investment.

Question 2

A barter economy is one in which:
 a. money serves as a medium of exchange.
  b. only precious metals are accepted as money.
  c. goods are traded directly for other goods.
  d. paper money is backed by gold.


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wtf444

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Reply #1 on: Jun 30, 2018
Answer to Question 1

The interest rate is the cost of borrowing investment funds. When the interest rate decreases, then the cost of borrowing falls, and so firms find it profitable to undertake additional investments. Therefore, we find an inverse relationship between the interest rate and investment spending.

Answer to Question 2

c


charchew

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Reply 2 on: Jun 30, 2018
Gracias!

blakcmamba

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Reply 3 on: Yesterday
Great answer, keep it coming :)

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