Investment spending in the United States tends to be unstable because:
A) expected profits are highly variable.
B) capital goods are durable.
C) innovation occurs at an irregular pace.
D) all of these contribute to the instability.

Question

Quizplus · Accepted Answer

Investment spending in the United States tends to be unstable because of the combined effect of all three factors listed. Expected profits are highly variable because the future is uncertain, and the returns on investment are influenced by a variety of economic variables. Capital goods are durable, meaning that they are expensive to replace and firms may delay replacing old equipment until it becomes obsolete. Innovation occurs at an irregular pace and can create boom and bust cycles in certain industries, resulting in instability in investment spending in those industries.

Investment Spending in the United States Tends to Be Unstable