ECONOMICS
BUSINESS CYCLES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Increase
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Decrease
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Stay the same
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None of the above
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Detailed explanation-1: -Business investment can affect the economy’s short-term and long-term growth. In the short term, an increase in business investment directly increases the current level of gross domestic product (GDP), because physical capital is itself produced and sold.
Detailed explanation-2: -Investment is the dynamic element of Gross Domestic Product (GDP), the only one that allows domestic production to increases and with it employment. It impacts the consumer and government spending, the latter through increased tax revenues.
Detailed explanation-3: -In an expanding economy, the GDP growth rate will be positive because businesses are growing and creating jobs for greater productivity.
Detailed explanation-4: -An increase in the level of production is likely to boost demand for capital and thus lead to greater investment. Therefore, an increase in GDP is likely to shift the investment demand curve to the right.