One Possible Disadvantage of a Cyclical Investment Subsidy Such as the Former

question 35

Multiple Choice

One possible disadvantage of a cyclical investment subsidy such as the former Swedish Investment Funds System is that:

• A) it is believed that investment does not respond to changes in the cost of capital.
• B) if the economy begins to slow down,firms may anticipate a future subsidy and delay investment.
• C) consumption should be encouraged,not investment.
• D) most economists believe that the government should not try to control the business cycle.

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Definitions:

Unit Selling Price

Unit Selling Price is the price at which a single unit of a product or service is sold, not accounting for any discounts or promotions.

Unit Variable Costs

Unit Variable Costs refer to the expenses that vary directly with the production volume, including materials and labor directly involved in manufacturing.

Variable Cost

Expenses that fluctuate in direct correlation with the volume of production or business operations.

Contribution Margin Ratio

A financial metric that represents the portion of sales revenue that is not consumed by variable costs and can contribute to covering fixed costs.