Investment spending (1) and interest rates Investment expenditures (I): What happens to demand for financial assets that earn a return (like stocks or bonds) when interest rates go up? (hint: interest is paid to the asset owner and paid by borrowers). What happens to the demand for Investment (I) as we have defined it in GDP (C + I + G + NX) when interest rates go up? Why? There are two reasons to remember: The opportunity cost of not savings therefore "I" The cost of borrowing therefore 661