If an Increase in the Level of Investment by Firms

question 4

Multiple Choice

If an increase in the level of investment by firms results in disequilibrium between injections and withdrawals in the circular flow model:

• A) GDP will increase and withdrawals will decrease until J = W
• B) GDP will increase and withdrawals will also increase until J = W
• C) GDP will decrease and withdrawals will increase until J = W
• D) GDP will decrease and withdrawals will also decrease until J = W

---

Definitions:

Loss-Minimizing

A strategy aimed at reducing the impact of losses in operations, finance, or investment, usually by identifying and mitigating risk factors.

Loss

A financial situation in which expenses exceed revenues, indicating negative profitability for a business or investment.

New Firms

Newly established business entities that have recently started operations, contributing to innovation, competition, and economic dynamics.

Existing Firms

Businesses that are already operating within a market, as opposed to new entrants.