When future total factor productivity is expected to increase,
A) investment demand decreases and output demand decreases.
B) investment demand increases and output demand increases.
C) current labour demand increases and output supply increases.
D) investment demand increases and output supply increases.
E) investment demand increases and output supply decreases.

Question

Quizplus · Accepted Answer

When future total factor productivity is expected to increase, firms anticipate higher future returns on investment, leading to an increase in investment demand. Additionally, the expectation of higher productivity can boost consumer and business confidence, leading to an increase in output demand.

When Future Total Factor Productivity Is Expected to Increase