Asked by Shalini Ballur on May 28, 2024
Verified
Other things equal, an increase in the equilibrium interest rate will
A) increase R&D spending.
B) rise when the supply of loanable funds increases.
C) decrease purchases of capital goods and reduce R&D spending.
D) increase bank lending.
Equilibrium Interest Rate
The equilibrium interest rate is the interest rate at which the supply of loanable funds equals the demand, reflecting a balance in the financial market.
R&D Spending
The amount of money that is invested in research and development activities by businesses, organizations, or governments to innovate or improve products and services.
- Evaluate the impact of interest rate fluctuations on savings, investments, and the cost of borrowing.
Verified Answer
RG
Reymundo GutierrezJun 01, 2024
Final Answer :
C
Explanation :
An increase in the equilibrium interest rate makes borrowing more expensive, which can lead to a decrease in investments in capital goods and research and development (R&D) spending, as firms may find it less attractive to finance these activities through borrowing.
Learning Objectives
- Evaluate the impact of interest rate fluctuations on savings, investments, and the cost of borrowing.