Question

(1) Real-Balances Effect
(2) Household Expectations
(3) Interest-Rate Effect
(4) Personal Income Tax Rates
(5) Profit Expectations
(6) National Incomes Abroad
(7) Government Spending
(8) Foreign Purchases Effect
(9) Exchange Rates
(10) Degree of Excess Capacity
Answer the question based on the accompanying list of factors that are related to the aggregate demand curve. Investment spending would most likely be influenced by changes in

Multiple Choice

(A) 5 and 10.
(B) 1 and 3.
(C) 8 and 9.

Answer 1

Answer:

(A) 5 and 10.

Explanation:

Factor which can shift the Investment spending:

(5) Profit Expectations

              If the firm forecast a good economy will probably invest more than if it forecast a bad economy. businessman will increase and decrease their investment based on expepectations.

(10) Degree of Excess Capacity

              Assuming a rational behavior, company's will investment if needed. So if there is a portion of unsued capital they will use it before investing to acquire more. Once the current capital is used or near max capacity they will invest. Below a certain threshold they won't.