Changes in net investment by business are closely linked to fluctuations in a nation's output of goods and services, employment and prices. In fact, substantial cutbacks in inventory investment and long-term capital spending occur on average every 3 to 4 years in the U.S., usually precipitating a period of inflation.

Question

Quizplus · Accepted Answer

Changes in net investment by businesses do indeed affect a nation's output, employment, and prices, but substantial cutbacks in inventory investment and long-term capital spending typically precede economic downturns or recessions, not periods of inflation. Inflation can be a consequence of various factors, including excessive demand, but the direct link as stated is inaccurate.

Changes in Net Investment by Business Are Closely Linked to Fluctuations