Investment spending will increase when the:
A)interest rate rises.
B)company income tax increases.
C)business cash flow increases.
D)firms become more pessimistic about earning future profits.

Question

Quizplus · Accepted Answer

Investment spending is directly related to business cash flow. When cash flow increases, firms have more funds available for investment in capital projects, machinery, and equipment. Therefore, C is the only correct choice. A is incorrect because investment spending decreases when interest rate rises due to higher borrowing costs. B is incorrect because an increase in company income tax reduces the available funds for investment. D is incorrect because firms become less likely to invest in the future if they are more pessimistic about earning future profits, leading to a decrease in investment spending.

Investment Spending Will Increase When The