Suppose business managers become more optimistic about future sales and profits.How will this affect the autonomous investment function?
A) It will create a rightward movement along the autonomous investment function.
B) It will create a leftward movement along the autonomous investment function.
C) It will create an upward shift of the autonomous investment function.
D) It will create a downward shift of the autonomous investment function.

Question

Suppose business managers become more optimistic about future sales and profits.How will this affect the autonomous investment function?  
A) It will create a rightward movement along the autonomous investment function. 
B) It will create a leftward movement along the autonomous investment function. 
C) It will create an upward shift of the autonomous investment function. 
D) It will create a downward shift of the autonomous investment function.

Quizplus · Accepted Answer

An upward shift of the autonomous investment function is the correct answer because when business managers become more optimistic about future sales and profits, this typically leads to an increase in planned investment spending. This leads to a higher level of investment spending at every interest rate level, which results in an upward shift of the autonomous investment function.

Suppose Business Managers Become More Optimistic About Future Sales and Profits.How