Real Interest Rates and Investment Are

question 190

Multiple Choice

Real interest rates and investment are

• A)negatively correlated because higher real interest rates make it easier for the firm to borrow funds.
• B)negatively correlated because higher real interest rates will increase the firm's profits.
• C)positively correlated because higher real interest rates make it easier for the firm to borrow funds.
• D)negatively correlated because higher real interest rates make borrowing by firms more costly.
• E)positively correlated because higher real interest rates make borrowing by firms less costly.

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Definitions:

Island Arc

An island arc is a curved chain of volcanic islands located at a tectonic plate margin, typically formed above a subducting plate where magma rises to the surface, creating new crust.

Mid-Ocean Ridge

An underwater mountain system formed by plate tectonics, characterized by a continuous volcanic mountain chain that encircles the globe.

Andes

A major mountain range along the western edge of South America, formed by the subduction of the Nazca Plate beneath the South American Plate.

Pyroclastic Flows

Fast-moving currents of hot gas and volcanic materials (such as ash and rock fragments) that flow down the slopes of a volcano during an explosive eruption.