A rise in future consumption spending, everything else remaining unchanged, will cause business investment spending to
A)decline.
B)not change.
C)rise.
D)fall at first, then rise later.

Question

Quizplus · Accepted Answer

An increase in future consumption spending signals a greater demand for goods and services in the future. As a result, businesses are likely to increase their investment spending to accommodate the expected increase in demand. This increase in investment spending can take the form of capital investments, research and development, or increased hiring to expand production. Therefore, a rise in future consumption spending will cause business investment spending to rise as well.

A Rise in Future Consumption Spending, Everything Else Remaining Unchanged