An increase in the prevailing interest rate ?
Correct answer: B. decreases the present value of future return from investment and decreases investment
- A. increases the present value of future returns from investment and increases investment
- B. decreases the present value of future return from investment and decreases investment
- C. decreases the present value of future returns from investment and increase investment
- D. increases the present value of future returns from investment and decreases investment
Explanation
A higher interest rate increases the discount rate, so the present value of future investment returns falls. Lower expected present returns reduce the incentive to invest.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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