Question

When providing funds, surplus spending units generally prefer

a) Short-term investments
b) Long-term investments
c) No preference between short and long-term investments
d) High-risk investments

Answer 1

Surplus spending units generally prefer long-term investments, such as stocks and mutual funds, due to their potential for higher returns over an extended period of time.

Step-by-step explanation:

When providing funds, surplus spending units generally prefer long-term investments.

Long-term investments, such as stocks and mutual funds, have the potential for higher returns over an extended period of time. While they also carry higher risks in the short term, the ups and downs of the stock market tend to even out over several decades, resulting in higher returns compared to short-term investments or bank accounts.

Thus, it is important for investors to consider the tradeoff between risk and return and choose investments that align with their financial goals and time horizon.