ther things being equal investment spending when A decreas

ther things being equal, investment spending ________ when ________.

A. decreases; firms expect sales to fall

B. increases; firms have excessive production capacity

C. increases; the rate of growth of real GDP is low

D. decreases; the obsolete or worn out physical capital increases

E. increases; market interest rates increase.

Solution

Ans is A

When firm expects sales to go down in future then firms have pessimistic view which leads to slow down the economy and investor dont invest and investment decreases.

However investment has inverse relation with excess producyion capacity, intefest rate and direct relation with growth of real GDP