Question

Which of the following is a determinant of firms' investment and employment decisions?

cost of capital
expectations of future economic conditions
interest rates

O cost of capital
O expectations of future economic conditions
O interest rates
O all of these are correct.

Answer 1

The determinants of firms' investment and employment decisions include the cost of capital, expectations of future economic conditions, and interest rates.

Step-by-step explanation:

The determinant of firms' investment and employment decisions includes the following factors:

• Cost of capital: The cost of capital represents the expense a business incurs to obtain funding for investment. It includes interest rates and other expenses associated with borrowing or using equity to finance capital expenditures.
• Expectations of future economic conditions: Firms consider their expectations of future economic conditions to assess the potential demand for their products or services. Positive expectations of economic growth can drive firms to increase investment and employment.
• Interest rates: Interest rates influence firms' decision-making regarding borrowing and investment. Lower interest rates make borrowing more attractive and can stimulate investment spending, while higher interest rates can have the opposite effect.