Which of the following is true about investment?
A) In a competitive capital market, private investors have a strong incentive to evaluate projects carefully and allocate their funds toward those projects expected to yield the highest rates of return.
B) In a competitive environment, profitable investment projects will tend to increase the wealth of the nation.
C) When investment funds are allocated by governments (rather than capital markets), political clout rather than the expected rate of return will generally determine which projects are undertaken.
D) All of the above are correct.

Question

Quizplus · Accepted Answer

All of the statements are true about investment. In a competitive capital market, private investors have a strong incentive to carefully evaluate projects to get the highest rates of return. In a competitive environment, profitable investment projects will tend to increase the wealth of the nation. However, when government allocates investment funds, political clout may determine which projects are undertaken, rather than the expected rate of return.

Which of the Following Is True About Investment