Under what circumstances will increases in investment tend to occur?
A)when the interest rates start to increase
B)when consumers become more optimistic in their expectations toward the future
C)when the level and rate of change of profits increases
D)when inventories unexpectedly increase

Question

Quizplus · Accepted Answer

Increases in investment tend to occur when the level and rate of change of profits increases. When firms are making more profits, they have more resources available to invest in new projects or expansions. Increased profits may also signal a positive economic outlook and encourage firms to invest more in anticipation of future demand. Options A and B may also influence investment decisions but are not always reliable indicators. Option D may actually lead to a decrease in investment as firms may try to decrease inventories before investing in new projects.

Under What Circumstances Will Increases in Investment Tend to Occur