Investment spending ________ during a recession and ________ during an expansion. a. declines; increases b. declines; declines c. increases; declines d. increases; increases
Question
Investment spending ________ during a recession and ________ during an expansion.
a. declines; increases
b. declines; declines
c. increases; declines
d. increases; increases
Solution
The correct answer is:
a. declines; increases
Here's why:
Investment spending refers to the amount of money spent by businesses on capital goods like machinery, buildings, and technology. During a recession, businesses are less likely to invest in new capital goods because of the uncertain economic environment and the potential for lower returns on investment. Therefore, investment spending typically declines during a recession.
On the other hand, during an economic expansion, businesses are more likely to invest in new capital goods because the economic environment is more stable and the potential for higher returns on investment is greater. Therefore, investment spending typically increases during an expansion.
Similar Questions
Risk premiums on corporate bonds tend to ________ during business cycle expansions and________ during recessions, everything else held constant.A) increase; increaseB) increase; decreaseC) decrease; increaseD) decrease; decrease
A decrease in aggregate demand results in a(n) ________ in the ________.Question 10Answera.recession; long runb.expansion; short runc.expansion; long rund.recession; short run
An increase in planned investment spending results in aggregate output to ________________.a.increase by an amount less than the change in investment spending.b. increase by an amount equal to the change in investment spending.c.increase by an amount greater than the change in investment spendingd.decrease by an amount less than the change in investment spending
When interest rate in the economy decreases , the price of existing bonds ____.2 pointsa) Increasesb) Fluctuatec) Decreasesd. Any of the above
Payments from the government for which there is no exchange of productive goods or services are called ______ payments and they tend to rise during a recession and fall during an economic expansion.wage or salaryprocyclicaltransferfactor
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.