New investment is things like making buildings, investing in VC, making new machines for manufacturing. Those are funded by cash or loans. When interest rates r

New investment is things like making buildings, investing in VC, making new machines for manufacturing. Those are funded by cash or loans. When interest rates rise more cash goes to seeking interest and less toward these physical investments, and less money is created de novo from loans to fund these things. It’s worth keeping in mind that money spent on new buildings and machines goes to wages of employees building them, which then goes to rents and food, and elsewhere throughout the economy. For 2, yes and no. A lot of workers are employed doing things with low or speculative marginal ROI (example: Coca Cola starts funding R&D into a new line of beverages) because the cost of capital (taking a loan against cash flow or spending earnings on reinvestment instead of returning it to shareholders) is low. Increasing interest rates increases the cost of capital, the risk feee opportunity cost of spending money on more speculative pursuits like R&D. So now Coca Cola might instead choose to return that money to shareholders or not take out financing to start operations like that