In which of the following industries or sectors of the economy will business cycle ﬂuctuations likely have the greatest effect on output?
A) military goods
B) capital goods
C) textile products
D) agricultural commodities

Question

Quizplus · Accepted Answer

Business cycle fluctuations are likely to have the greatest effect on output in industries that produce capital goods, such as machinery and equipment, because investment in these goods tends to be more sensitive to changes in economic conditions. In times of economic expansion, businesses are more likely to invest in new capital goods, leading to an increase in output in this sector. Conversely, during a recession, businesses may delay or cancel new capital investments, leading to a decrease in output.

In Which of the Following Industries or Sectors of the Economy