Business investment spending represents spending by


Business investment spending represents spending by businesses on new plants, factories, equipment, technologies, etc. According to economic theory, the primary determinant of the level of business investment spending is the level of real interest rates. The Federal Reserve in 2008 reduced interest rates effectively to zero. Business investment spending, however, collapsed, declining as much as 25% annually over the next two years. How would you resolve this seeming paradox of rock-bottom interest rates and a collapse in business investment spending? Please briefly explain.

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Business Economics: Business investment spending represents spending by
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