If business firms are more optimistic during the expansion phase of the business cycle,they
A)raise their expected rates of return on projects and investment increases.
B)lower their expected rates of return on projects and investment increases.
C)raise their expected rates of return on projects and investment decreases.
D)lower their prices and increase investment.

Question

Quizplus · Accepted Answer

During the expansion phase of the business cycle, businesses are typically more optimistic about the economy and future prospects. This optimism leads to an increase in expected rates of return on projects and investments, as businesses believe that they will be able to earn higher profits. As a result, investment typically increases during this phase. Thus, option A is the correct answer.

If Business Firms Are More Optimistic During the Expansion Phase