How would an increase in interest rates affect investment? A. Real investment spending declines. B. Real investment spending remains unchanged. C. Real investment spending may increase, decrease or remain the same depending on the rate of inflation. D. Real investment spending increases.

A

Explanation:

Investment is a function that depends negatively on interest rates. If interest rates increase, there are less profitable projects, hence, there is less investment. Also, if interest rates increase, the cost of borrowing is bigger, then less projects may be financed and total investment decreases.