Since interest rates are higher, I was thinking that it would spur more investment
Higher interest rate = bigger return on investment
But it says that an increase in interest rates decreases business investment
Since interest rates are higher, I was thinking that it would spur more investment
Higher interest rate = bigger return on investment
But it says that an increase in interest rates decreases business investment
Higher interest costs on loans to purchase equipment.
i save more when rates ae high
What s200 said. Also, higher interest rates mean your minimum rate of return required for a project will go up. Therefore, fewer projects will provide a positive NPV.
Why do you discount me by 90%?
^lol
An increase in interest rate will definitely lead to an increase in returns. However, people need money in order to invest, and most people dont have the capital requirement, so they have to resort to loan (borrowing from banks). So here, an increase in interest rate will discourage investors from borrowing from the bank, meaning they cant invest, thus affecting investment negatively.