Which of the Following Explains Why Small Reductions in Interest

question 1

Multiple Choice

Which of the following explains why small reductions in interest rates may not lead to an increase in investment spending?

• A)Excess capacity gives businesses little incentive to expand production capacity.
• B)Investment demand is elastic with respect to the interest rate.
• C)Improved expectations shift the investment demand curve to the right.
• D)Banks are eager to make loans at the lower interest rate.