Given the expected rate of return on all possible investment opportunities in the economy:

A) an increase in the real rate of interest will reduce the level of investment
B) a decrease in the real rate of interest will reduce the level of investment
C) a change in the real interest rate will have no impact on the level of investment
D) an increase in the real interest rate will increase the level of investment

ANSWER:

A) an increase in the real rate of interest will reduce the level of investment