Inventory investment consists of A) construction expenditures, ...

[Sufayan.ah]

Inventory investment consists of
 
  A) construction expenditures, raw materials, and inventories of finished goods.
  B) goods in process, raw materials, and purchases of office machinery.
  C) raw materials, goods in process, and construction expenditures.
  D) inventories of finished goods, goods in process, and raw materials.

Question 2

What is precautionary saving? What might cause precautionary saving to increase or decrease if households have a desired level of wealth?
 
  What will be an ideal response?

[AISCAMPING]

Answer to Question 1

D

Answer to Question 2

Precautionary saving is extra saving by households to protect themselves from unexpected decreases in future income due to job loss, illness, or disability. Precautionary saving will tend to increase if households believe the economy has started to perform poorly and the probability of a job loss has increased, if households have an unexpected decrease in wealth, and if households have increased uncertainty about future events. Precautionary saving will tend to decrease if households believe the economy is performing well and the probability of a job loss has decreased, if households have an unexpected increase in wealth, and if households have decreased uncertainty about future events.