Which of the following factors will not affect the profit expectations of business firms and change the level of investment?
A)Entry of new firms into the market
B)Introduction of new taxes
C)Announcement of new government subsidies
D)The current level of GDP
E)The marginal propensity to consume

Question

Quizplus · Accepted Answer

The marginal propensity to consume is a parameter that determines how much of each additional dollar of income is spent on consumption. While it can affect aggregate demand and ultimately GDP, it does not directly impact the profit expectations of business firms or their level of investment. Entry of new firms into the market, introduction of new taxes, and announcement of new government subsidies can all affect market conditions and therefore the profit expectations of businesses. GDP also directly affects the level of economic activity, and is an important factor in firms' investment decisions.

Which of the Following Factors Will Not Affect the Profit