Economics - Economics Section 2
- Option : C
- Explanation : Both statements are correct. The economy may face shortages because the demand for factors of production exceeds the supply. Furthermore, companies might overinvest in production capacity which can result in idling machines and workers if the economic growth slows down.
7. Which of the following is most likely to have the most pronounced cyclical behavior?
- Option : A
- Explanation : Durable goods have a long useful life in comparison to non-durables and services. Therefore, consumers tend to delay purchase when economic outlook is not favorable.
- Option : C
- Explanation : Business cycle indicators need to represent the activities in the whole economy and this should not be influenced by some particular sectors that may have uncorrelated fluctuations.
- Option : B
- Explanation : It usually takes much longer time to plan and complete large construction projects than for equipment orders.
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