... in order to invest in a new machine, then the amount of money the firm will owe in the future will be larger as interest rates increase. This will discourage a firm from investing in any new machines or factories. A second reason id that potential consumers in the firms product will be disinclined to buy any products, let alone that of the firms- if interest rates are up, then they are more inclined to save money, or purchase bonds, in order to make money. In this essay I will show that the above relationship is much more complicated than it first seems and that factual evidence in fact shows the relationship between Investment Expenditure and Interest rates to be extremely volatile and unpredictable. The interest rate, i, can actually be altered, albeit indirectly, by the Central Bank. If one assumes that there are only two types of assets in the economy: ...

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