If the government announced the economy is headed into an expansionary period of rising real GDP and prices, businesses would most likely respond by:
a. lowering wages so that they could afford to hire more workers
b. dismantling some of existing production facilities
c. outsourcing fewer jobs to foreign countries
d. increasing their spending on new capital
i think the answer is A but im not sure
help please
I disagree.
If the economy is expanding, wouldn't businesses also want to expand?
so D?
Yes. I agree with D.
To answer this question, we need to understand the concept of an expansionary period and how businesses typically respond to it. An expansionary period is characterized by rising real GDP and prices, indicating economic growth. In such a period, businesses generally anticipate increased demand for their goods and services.
Now, let's analyze each option and see which one aligns with business behavior during an expansionary period:
a. Lowering wages so that they could afford to hire more workers: This response seems counterintuitive during an expansionary period. Typically, businesses are more likely to increase hiring and wage levels to meet the increased demand for their products and services. Therefore, this option is unlikely to be the correct answer.
b. Dismantling some of existing production facilities: This option implies reducing production capacity, which contradicts the expected increase in demand during an expansionary period. Businesses usually aim to expand their production capabilities to meet the growing consumer needs. Hence, this choice is not likely the correct answer.
c. Outsourcing fewer jobs to foreign countries: During an expansionary period, businesses tend to focus on meeting increased domestic demand. It would make sense for them to rely less on outsourcing and instead enhance domestic production capabilities. Therefore, this option could be a possible response by businesses during an expansionary period.
d. Increasing their spending on new capital: This option aligns with businesses' behavior during an expansionary period. Increased spending on new capital, such as machinery, technology, and infrastructure, helps businesses improve production efficiency, expand capacity, and meet the rising demand. This option is quite likely the correct answer.
Based on the analysis above, option d (increasing their spending on new capital) is the most probable response by businesses during an expansionary period.