12. An increase in the __ interest rate __ investment. a. nominal, increases b. nominal , decreases c. real, increases d. real, decreases

## Step 1<br />The problem is asking us to identify the relationship between interest rates and investment. Interest rates can be either nominal or real. Nominal interest rates are the stated rates, while real interest rates are the nominal rates adjusted for inflation.<br /><br />## Step 2<br />Generally, when interest rates increase, the cost of borrowing money increases. This means that the return on investments that require borrowed money may decrease, leading to a decrease in investment.<br /><br />## Step 3<br />On the other hand, when interest rates decrease, the cost of borrowing money decreases. This means that the return on investments that require borrowed money may increase, leading to an increase in investment.<br /><br />## Step 4<br />Therefore, the relationship between interest rates and investment is generally inverse. This means that as interest rates increase, investment tends to decrease, and vice versa.