Which of the following explains why investment may be procyclical?
A) high installation costs for replacing, updating, and expanding the capital stock
B) simultaneous investment by firms in various industries throughout the economy
C) the correlation between current profits and investment expenditures
D) the basing of expectations on current conditions
E) all of the above

Question

Quizplus · Accepted Answer

All the options provided explain why investment may be procyclical. High installation costs, simultaneous investment across industries, the correlation between current profits and investment, and basing expectations on current conditions all contribute to the cyclical nature of investment, aligning with economic upturns and downturns.

Which of the Following Explains Why Investment May Be Procyclical