An economy's planned investment is depicted on a graph with the interest rate on the vertical axis and the quantity of investment on the horizontal axis. The relationship is shown by a single, downward-sloping curve. If businesses begin to undertake a greater quantity of investment, and this change is represented as a movement from one point to another point on the same curve, which of the following events is the only possible cause?

Consider a standard graph for planned investment, with the interest rate on the vertical axis and the quantity of investment on the horizontal axis. A new government policy that provides a tax credit for businesses purchasing new equipment will cause a movement down and to the right along the existing investment curve.

Central Bank Policy and Investment

Effect of Interest Rate Changes on Investment

For a standard investment function graph where the interest rate is on the vertical axis and the quantity of planned investment is on the horizontal axis, match each economic event with its resulting effect on the investment curve.

When the quantity of planned investment changes due to a change in the interest rate, this is represented on a standard investment graph as a ________ the existing investment curve, not a shift of the entire curve.

A country's central bank announces a reduction in its main policy interest rate. Arrange the following events in the logical sequence that would typically follow this announcement, as represented on a standard graph of the investment function (with the interest rate on the vertical axis and the quantity of investment on the horizontal axis).

Analyzing the Investment Response to Interest Rate Fluctuations

Investment Decision at a Manufacturing Firm

The planned investment in an economy is described by the function I = 2,500 - 100r, where I is the amount of investment and r is the interest rate in percentage points. If the interest rate falls from 5% to 3%, what is the resulting change?