Investment in Capital Goods Only Makes Sense When

question 41

Multiple Choice

Investment in capital goods only makes sense when

• A) the capital goods can be used to increase the future output of consumption goods.
• B) the savings rate of a country is low.
• C) the interest rate is high and people have a positive rate of time preference.
• D) economies are organized along capitalist lines.

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Definitions:

Complements

Goods or services that are used together, where the increase in consumption of one leads to an increase in consumption of the other.

Substitutes

Goods or services that can be used in place of one another; an increase in the price of one leads to an increase in demand for the other.

Related Goods

Products or services that are connected by consumer preferences or demand, such as substitutes and complements.

Price Decreases

Occurs when the cost of a good or service drops, often due to factors like increased supply, reduced demand, or competitive market pressures.