Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
It increases the overall supply of goods and services.
B
It decreases the demand for labor.
C
It leads to a misallocation of resources in the economy.
D
It creates greater competition among firms.
Understanding the Answer
Let's break down why this is correct
Answer
Investment in capital goods, like machinery and buildings, plays a crucial role in how resources are allocated over time. When businesses invest in these goods, they can produce more and better products, which can lead to increased efficiency. This increase in production often means that resources, such as labor and raw materials, are redirected to support these more productive processes. For example, if a bakery invests in a new oven, it can bake more bread with the same amount of flour and labor, allowing it to serve more customers and potentially expand its business. In the long run, this shift not only improves productivity but also can lead to more jobs and better goods for consumers.
Detailed Explanation
When businesses invest in capital goods, like machines or tools, they can produce more products. Other options are incorrect because Some might think that investing in machines means fewer workers are needed; It's a common belief that investment can waste resources.
Key Concepts
capital goods
resource allocation
Topic
Investment and Long-Run Supply
Difficulty
medium level question
Cognitive Level
understand
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