Economists believe that changes in investment spending are important for forecasting the business cycle because:
A) increases in investment spending raise tax revenues,which allows government to spend more.
B) investment closely reflects consumer sentiment.
C) changes in investment show where the economy has been.
D) investment is a key determinant of economic growth.

Question

Quizplus · Accepted Answer

Investment is a key determinant of economic growth. When businesses invest in new factories, equipment, or technologies, they create new jobs and increase productivity, which can fuel economic growth. Changes in investment spending can therefore provide insight into the future direction of the business cycle. Options A and B are not necessarily true, and C suggests that investment only shows where the economy has been, rather than where it is going.

Economists Believe That Changes in Investment Spending Are Important for Forecasting