For an economy to increase investment, it must
A) increase saving.
B) increase present consumption.
C) buy more stocks and bonds.
D) increase nominal GDP.

Question

Quizplus · Accepted Answer

In order for an economy to increase investment, it must have more savings available to be used for investment purposes. This means that the government, businesses, and individuals must increase their savings rate in order to create a larger pool of funds available for investment opportunities. Option B, increasing present consumption, would have the opposite effect on investment as more consumption means less available funds to save and invest. Option C, buying more stocks and bonds, may increase investment in the stock market but does not necessarily translate into investment in the broader economy. Option D, increasing nominal GDP, may create more overall economic activity but does not necessarily mean that there will be more savings available for investment.

For an Economy to Increase Investment, It Must