State four factors that explain why investment spending tends to be unstable.
What will be an ideal response?
Investment spending is based to a large extent on expectations about future profitability and this can vary significantly from period to period. Technological changes affect investment spending and these changes are not predictable in their timing. Investment goods tend to be long lasting and “lumpy” in nature; that is, once a capital good is purchased it lasts a long time and the expenditure will not be repeated on a frequent, regular basis. Furthermore, this type of expenditure is usually large, so any changes tend to be substantial on a firm-by-firm basis. Expectations and profits are both highly variable. Actual profits may not meet expectations and this can affect expectations in the future. Expectations are also based on many different external factors.
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Suppose the United States is in the midst of a recession. What will happen to the value of the mpi?
A) It will decrease. B) It will fall to zero. C) It will not change. D) It will increase.
Check clearing is important to company cash management systems, because:
a. Companies can use it to accelerate payables. b. Companies can use it to decelerate receivables. c. Companies can sweep more funds into interest-earning assets by using efficient check-clearing process. d. All of the above. e. None of the above.