An economy's stock of capital increases directly because of
A)a decrease in business cycles.
B)a positive flow of investment.
C)high levels of immigration.
D)an increase in interest rates.
E)low levels of saving.

Question

Quizplus · Accepted Answer

Capital accumulation is the process of increasing the stock of capital goods, which are used to produce goods and services. A positive flow of investment, such as businesses investing in new machinery or individuals purchasing homes, increases the economy's stock of capital. Decrease in business cycles, high levels of immigration, and low levels of saving may indirectly affect capital accumulation but they do not directly increase the stock of capital. An increase in interest rates may encourage saving, which could eventually lead to increased capital accumulation, but it is not a direct cause.

An Economy's Stock of Capital Increases Directly Because of