The Portion of Income That Is Spent on Productive Inputs

question 64

Multiple Choice

The portion of income that is spent on productive inputs, such as factories, machinery, and inventories, is called:

• A) investment.
• B) savings.
• C) consumption spending.
• D) loanable funds.

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Definitions:

Sunk Costs

Expenses that have been incurred and cannot be recovered, which should not influence future economic decisions.

Production

The process of creating goods or services using inputs like labor, capital, and raw materials.

Bounded Rationality

The concept that decision-making is limited by the information, cognitive limitations, and time constraints.

Opportunity Cost

The cost of foregone alternatives when one option is chosen over another, essentially the benefits you could have received by taking an alternative action.