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Author Question: Why does investment spending rise and fall with the overall level of GDP in the economy? What ... (Read 97 times)

Awilson837

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on: Jun 30, 2018
Why does investment spending rise and fall with the overall level of GDP in the economy?
 
  What will be an ideal response?

Question 2

An example of a consumption tax is
 
  A) an income tax. B) transfer payments.
  C) the Social Security tax. D) a sales tax.
Macroeconomics: Principles, Applications and Tools ¦ O'Sullivan, Sheffrin, Perez ¦ 7th Edition
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Tabitha_2016

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Reply #1 on: Jun 30, 2018
Answer to Question 1

If firms believe that GDP will continue to increase into the future, they may want to invest in anticipation of high future demand for their products. Similarly, if GDP falls and firms believe that this will continue into the future, they are less likely to invest, as their expectation of the future seems less lucrative.

Answer to Question 2

D


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