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Which of the following will cause the investment demand curve to shift to the right? Multiple...

Which of the following will cause the investment demand curve to shift to the right?

Multiple Choice

  • A decrease in interest rates.

  • A decrease in the cost of labor.

  • An improvement in technology.

  • An increase in disposable income.

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Answer #1

The investment demand curve shows the relationship between the interest rate and the level of investment. The curve is downward sloping and this shows a negative relationship between the interest rate and investment. This is because the cost of borrowing is the interest rate. So change in interest rate is a movement along the investment demand curve.

The improvement in the technology requires the new capital and this could lead to an increase in the investment. So this is a rightward shift of the investment demand curve.

A decrease in the labour costs will decrease the demand for new capital so the investment.

Ans: An improvement in technology.

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