Question

If businesses are confident about an increase in demand for their products, they will Select the correct answer below: expand production and reduce investment spending expand production and investment spending reduce production and investment spending reduce production and expand investment spending

Answer 1

expand production and investment spending

Step-by-step explanation:

If there is high likelihood of surge in demand, then supply should be such that it should be able to meet those demands. Hence, to increase supply production should be increased .

Second production cost is sum of fixed cost and variable cost. While fixed cost (cost which remains constant such as rent, labor charges and other cost which does not change with unit of production) remains same but variable cost will increase as variable cost is dependent on number of units of goods produced. So, when production increases variable cost will increase and hence investment will increase.

Thus, correct answer will increase production and investment spending.