What happens to interest rates and investment levels when a technological advancement improves credit card transactions?

When a technological advancement improves credit card transactions, it generally leads to a more efficient payment system. This efficiency often reduces transaction costs and increases consumer confidence in using credit, making consumers more likely to spend. As spending rises, businesses may experience higher demand for their products and services, which in turn encourages them to invest in expansion, such as hiring more employees or upgrading their facilities.

The increased ease and security of transactions can lead to a greater willingness to borrow money, as businesses and consumers feel more confident about their ability to repay loans. This surge in economic activity can shift the demand curve for funds to the right, putting downward pressure on interest rates. As a result, the combination of lower interest rates and increased economic confidence typically stimulates investment, leading to higher overall investment levels in the economy.

This scenario aligns with the explanation for why the correct answer includes falling interest rates and rising investment levels.