Identify the correct statement.
A)Investment is positively related to the interest rate.
B)Investment spending in an economy is stimulated by new production technology.
C)Investment is positively related to excess capacity.
D)Investment spending is positively related to the cost of capital goods.
E)Investment is negatively related to the rate of government spending.

Question

Quizplus · Accepted Answer

Investment spending in an economy is stimulated by new production technology. This is because new production technology increases the productivity of capital and labor, making investment more profitable. The other statements are not true - investment is negatively related to the interest rate (as the cost of borrowing increases), positively related to excess demand/low capacity utilization (as it signals the need for more investment to meet demand), and positively related to the productivity of capital goods (as mentioned in option B). Investment spending is not related to the rate of government spending.

Identify the Correct Statement