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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