The interest rate determines planned real investment.
What influence does interest rate have on investment?
Bonds and interest rates are inversely correlated:Bond prices decrease when interest rates rise, and vice versa.After rates rise, newly issued bonds will have coupons that are higher. This will make bonds with low coupons that were issued in an environment with lower rates worth less.
What factors influence planned real investment?
The primary factors that influence planned investment are the interest rate, business expectations, productive technology, and business taxes. The point at which the C, I, G, and X schedule crosses the 45-degree line is where equilibrium national income occurs.
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