Investment spending will increase when
A)the interest rate rises.
B)the corporate income tax increases.
C)business cash flow increases.
D)firms become more pessimistic about earning future profits.

Question

Quizplus · Accepted Answer

Investment spending is primarily driven by business cash flow. When businesses have more cash on hand, they are more likely to invest in new projects and expand their operations. Therefore, an increase in business cash flow would lead to an increase in investment spending. The other options (A, B, and D) would actually decrease investment spending.

Investment Spending Will Increase When