You want to invest in a firm whose profits show large fluctuations throughout the business cycle.Which of the following would you invest in?
A)A corporation that depends heavily on business fixed investment
B)A corporation that depends heavily on consumer services
C)A corporation that depends heavily on consumer nondurables
D)A corporation that depends heavily on government purchases

Question

Quizplus · Accepted Answer

A corporation that depends heavily on business fixed investment is more likely to experience large fluctuations in profits throughout the business cycle, as businesses tend to invest more heavily during periods of economic growth and reduce investment during periods of economic downturn. Consumer services and nondurables are more likely to show steady demand regardless of the business cycle, while government purchases tend to be more stable as they are not subject to market fluctuations in the same way as private sector investment.

You Want to Invest in a Firm Whose Profits Show