Question

Which among the following is a factor that influences induced investment?

• A. Anticipated profit margins
• B. Rate of interest
• C. Supply of money
• D. All of the above

Answer 1

Answer: (D)

All of the above

Induced investment refers to that investment which changes as the level of income changes in the economy. Therefore, it is the type of investment that depends on the level of income in the economy. Induced investments are influenced by the following factor in the economy:

1. Anticipated profit margin: If profit margin is anticipated to be high in future then investment will also increase in future and vice versa.

2. Rate of interest: There is a inverse relation between the rate of interest and investment. If the rate of interest is high then people will take less loan from the bank and they will have less money to invest in whereas if rate of interest is low then people will take more loan from the bank to invest in the business.

3. Supply of money: If supply of money is more in the market, then the investment will also be more and vice versa.