A Negative Shock Reduces Capital Investments Because

question 86

Multiple Choice

A negative shock reduces capital investments because:

• A) capital investments involve sunk costs.
• B) investments are always very speculative.
• C) capital investments are easily reversible.
• D) investors react only to capital investments that bring high returns.

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Definitions:

Simple Interest

Interest assessed only on the base amount, or on whatever portion of the base amount has not been settled.

Interest

Payment made for the use of borrowed money, calculated as a percentage of the principal sum.

Simple Interest

Interest calculated only on the initial amount of money (principal), not on the interest accrued over time.

Investment

Allocation of resources, such as time, money, or effort, in hope of generating a future benefit or return.