Which of the following could be a direct cause of investment spending increasing?
A) The wealth of consumers increasing causing them to radically increase their purchases.
B) Interest rates increase.
C) A firms costs unexpectedly drop making their profit margin higher.
D) Expected future income decreases.

Question

Quizplus · Accepted Answer

If a firm's costs unexpectedly drop, their profit margin would be higher, which could encourage them to increase investment spending. Option A is not a direct cause of investment spending increasing because it only discusses consumer purchases, not investment spending by firms. Option B suggests that interest rates increase, which would actually discourage investment spending. Option D suggests that expected future income decreases, which could discourage investment spending by firms.

Which of the Following Could Be a Direct Cause of Investment