Just after a cyclical trough,given the excess capacity in the economy,there should be an unusually ________ rate of closing the gap between desired and actual capital stocks,making net investment respond relatively ________ to rising sales.

Question

Quizplus · Accepted Answer

After a cyclical trough, when there is excess capacity, businesses are likely to invest more to close the gap between their current and desired capital stocks. This investment tends to be more responsive to rising sales because firms are trying to capitalize on the economic recovery, hence "high" rate and "strongly" to rising sales.

Just After a Cyclical Trough,given the Excess Capacity in the Economy,there