When the price level falls a. households want to lend less. b. the interest rate rises. c. firms want to spend less on investment goods. d. None of the above are correct.

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Babs

Business

5 June, 14:25

When the price level falls a. households want to lend less. b. the interest rate rises. c. firms want to spend less on investment goods. d. None of the above are correct.

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Pebbles · Answer 1

c. firms want to spend less on investment goods

Explanation:

According to the law of supply, as prices increase, firms will be willing to supply more quantities in the market. The gig prices act as a motivation to make profits. Firms will invest in increasing production to take advantage of high prices.

Should the prices fall, firms will not be encouraged to increase their supplies. They will not be interested in expanding their production capacities. As a result, they will spend less on investment goods. Low prices imply reduced profits; firms find it more risk to borrow to finance growth in when profitability is low.