If the Real Interest Rate Increases and Businesses Expect That

question 44

True/False

If the real interest rate increases and businesses expect that new equipment will significantly reduce their production costs in the future, then the investment share could increase, decrease, or stay the same.

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Definitions:

Lender of Last Resort

A lender of last resort is an institution, usually a country's central bank, that offers loans to banks or other eligible institutions that are experiencing financial difficulty or are considered highly risky.

Federal Reserve

The central banking system of the United States, which regulates banks, manages the country's money supply, and aims to ensure financial stability.

Monetary Policy

The actions undertaken by a central bank, such as the Federal Reserve, to control the money supply and influence the economy's overall level of activity, inflation, and interest rates.

Fiscal Policy

Government adjustments to its spending levels and tax rates to influence a nation's economy.