Question

Suppose that an increase in consumer confidence raises consumers' expectations of future income and thus the amount they want to consume today. This might be interpreted as an upward shift in the consumption function. How does this shift affect investment and the interest rate?

Answer 1

If people consume more, investment will increase as they buy more products. People will want to invest more in items, knowing that the people will buy their products and consume.
Not sure of interest rate... but perhaps it's the opposite, since investment is high... (interest rate may be low).

Answer 2

An increase in consumer confidence would result in an increase in consumption of goods and commodities....an upward shift in the consumption..hence would increase the investments as well as the investors are sure that their is a market for the product.

The interest rate what i think would be high...as the demand for capital is high as consumer are spending money producers are keen to invest more as their is increasing demand.

Answer 3

here wec an take a look on vicious circle of poverty having 4 important factors investment,production,income and saving.so when people will b having good income they will purchase more n save more n will invest more and this give rise to production.so due to this investment increase in economy due to which intrest rate decrease. so investment and intrest rate is having inverse relation.increace investment mean decreased intrest rate n decrease in investment increase in intrest rate.