In the long run,
A) higher consumption spending means a larger capital stock and a higher standard of living
B) higher investment spending means higher interest rates
C) higher investment spending means a larger capital stock and a higher standard of living
D) higher interest rates means higher consumption spending
E) higher government spending means a larger capital stock and a higher standard of living

Question

Quizplus · Accepted Answer

Investment spending contributes to the growth of the capital stock, which leads to increased productivity and a higher standard of living. Higher consumption spending alone does not necessarily lead to long-term economic growth. Higher interest rates do not directly lead to higher consumption spending, and higher government spending can have mixed effects on the economy depending on how it is financed and allocated.

In the Long Run