When firms spend more on additional holdings of raw materials,parts and finished goods ________.
A)they are increasing their fixed investment
B)they are increasing their inventory investment
C)they are increasing their private consumption
D)all of the above
E)none of the above

Question

Quizplus · Accepted Answer

Additional holdings of raw materials, parts, and finished goods constitute inventory investment since they are held for future sale or use in production. Therefore, firms are increasing their inventory investment when they spend more on these items. Option A is incorrect because fixed investment refers to spending on long-term assets like machinery, buildings, and equipment, not inventories. Option C is also incorrect as private consumption refers to the purchase of goods and services by households.

When Firms Spend More on Additional Holdings of Raw Materials,parts