Investment Demand Is Downward Sloping Because as the Interest Rate

question 71

Multiple Choice

Investment demand is downward sloping because as the interest rate decreases,

• A) each project's internal rate of return decreases.
• B) each project's internal rate of return increases.
• C) more projects will have an internal rate of return that exceeds the interest rate.
• D) more projects will have an internal rate of return that is less than the interest rate.

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Definitions:

Induced Consumption

Induced consumption is the portion of consumer spending that increases with income, implying that as people earn more, they tend to spend more.

Disposable Income

Available monetary resources for households post-income tax for spending and saving purposes.

Consumption

The use of goods and services by households. It is a primary component of economic activity and a key indicator of economic health.

Dissaving

Dissaving occurs when expenditures exceed income, leading to a depletion of savings or the accumulation of debt.