The inverse relationship between interest rates and quantity of investment conforms to Blank______.

Multiple choice question.

opportunity cost

marginal utility

the law of supply

the law of demand

1 answer

The correct answer is opportunity cost.

The inverse relationship between interest rates and the quantity of investment is often explained by the opportunity cost of investing. Higher interest rates increase the cost of borrowing and reduce the present value of future returns, leading to a decrease in investment. Conversely, lower interest rates make borrowing cheaper and increase the attractiveness of investment, thereby increasing the quantity of investment.