Final answer:
The correct production timeline is 'dollars are borrowed, investment occurs, and output is produced,' reflecting the balanced supply and demand of financial capital in the market and influencing the rates of return and associated risks. Therefore, the correct option is B.
Step-by-step explanation:
The production timeline typically follows these steps: initially, dollars are borrowed to finance investments; subsequently, investment occurs as borrowed funds are used to produce goods, services, or further capital; and finally, output is produced when the investments result in products or services that can be sold in the market.
Hence, the correct sequence in a production timeline is: dollars are borrowed, investment occurs, and output is produced. This aligns with the national saving and investment identity which assumes that the supply and demand for financial capital are balanced in the market. When you consider this timeline, it is crucial to engage your brain and think about the supply (savings) and demand (investments) sides of the financial capital market.
Additionally, suppliers of financial capital must consider the rates of return and risks involved with different types of financial investments. Higher risk or lower returns can shift the supply of financial capital away from one investment towards another that is perceived to be more secure or profitable.