Asked by Francesca Kivitt on Jun 27, 2024
Verified
What happens to domestic investment as the real interest rate rises? Explain your answer.
Real Interest Rate
The rate of interest an investor, saver, or lender receives (or expects to receive) after allowing for inflation.
Domestic Investment
The total amount of money invested within a country’s borders by both the private and public sectors.
- Examine the influence of interest rate volatility on economic health, focusing on net capital outflow.
Verified Answer
LL
Levina LairensiaJun 29, 2024
Final Answer :
As the real interest rate rises, the cost of borrowing to finance capital projects rises, which reduces investment.
Learning Objectives
- Examine the influence of interest rate volatility on economic health, focusing on net capital outflow.