If firms are less optimistic that future profits will rise and remain strong for the next few years, then:
A)investment spending will fall.
B)investment spending will rise.
C)investment spending will remain unaffected.
D)investment spending will rise at first, then fall.

Question

Quizplus · Accepted Answer

When firms are less optimistic about future profits, they are likely to reduce their investment spending as they may want to prioritize other areas of their business or save money in case profits do not meet expectations. Therefore, investment spending will fall.

If Firms Are Less Optimistic That Future Profits Will Rise