Which of the Following Is True Regarding Investment

question 65

Multiple Choice

Which of the following is true regarding investment?

• A) In the short run it increases aggregate supply but in the long run it increases aggregate demand.
• B) In the short run it influences aggregate demand and in the long run it influences the rate at which the economy grows.
• C) In the short run it influences aggregate demand but in the long run it retards economic growth since it requires saving.
• D) In the short run it reduces aggregate demand because it requires savings but in the long it promotes economic growth.

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Definitions:

Market Failures

Situations where the allocation of goods and services by a free market is not efficient, often leading to a loss of economic value.

Property Rights

Legal rights to possess, use, and dispose of assets, including real property or intellectual property, ensuring control and economic benefits to the rights holder.

External Costs

Costs of a transaction or activity that affect parties who are not directly involved in it, such as pollution affecting the wider community.

Law of Demand

The principle that, all else being equal, an increase in the price of a good will decrease the quantity demanded, and a decrease in price will increase the quantity demanded.