Having just begun self-studying economics, I apologise if this question is too simple.
Do investments increase or decrease with increased interest rate?
According to the small, closed economy model (as far as I understand it) increased interest rates make borrowing harder and hence crowed out investment. However, in the large, open economy model it is mentioned that higher interest rates encourage both domestic and foreign investors to lend in the country, so investment can increase?
I appreciate that this boils down to a difference in foreign vs. domestic, and ultimately into the question wether investment is lending or borrowing. Anybody who could put me on the right track please?