The investment demand curve will shift to the left as a result of
A) an increase in the excess production capacity available in industry.
B) a decrease in business taxes.
C) increased business optimism with respect to future economic conditions.
D) a decrease in labor costs.

Question

Quizplus · Accepted Answer

An increase in excess production capacity indicates that businesses are not operating at full capacity and therefore have no need for additional investment in new equipment or facilities. This would cause a decrease in investment demand and a leftward shift of the investment demand curve. The other choices would either increase investment demand (B and C) or have no direct effect on investment demand (D).

The Investment Demand Curve Will Shift to the Left as a Result