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The major factors that determine investment are interest rates and inflation. The relationship between interest rate and aggregate demand is inversely related. The relationship between inflation and aggregate demand is positvely related.
What is aggregate demand?
Aggregate demand is the sum total of all goods and services produced in an economy in a given period.
To learn more about aggregate demand, please check: https://brainly.com/question/24319248
Interest rates and inflation are the two most important factors influencing investment. When inflation rises, real spending falls as the value of money falls.
This change in inflation causes Aggregate Demand to move to the left and decline.
Individuals and corporations seek to borrow more money at cheaper interest rates and reinvest it in capital and consumer goods.
As a result, aggregate demand will rise. However, when interest rates rise, central banks profit more from the interest payments they receive from borrowers.
What do you mean by aggregate demand?
The entire amount of money spent on those goods and services at a certain price level and moment in time is referred to as aggregate demand.
All consumer products, capital goods (factories and equipment), exports, imports, and government spending are included in aggregate demand.
For more information about Aggregate Demand refer to the link:
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