Praxis 5511 Practice Test Practice Question
Increases in business spending on physical capital will result in which of the following in the long run?
Correct Answer: B
Rationale: Increases in business spending on physical capital enhance productivity and efficiency, leading to long-term economic growth. This investment often results in the development of new technologies and improved infrastructure, fostering a more robust economy.
Option A, stagflation, refers to stagnant economic growth coupled with inflation, which is unlikely to occur with increased capital investment. Option C, high unemployment, contradicts the expected outcome of capital investment, as it typically creates jobs. Option D, hyperinflation, involves extreme inflation often due to excessive money supply, not directly related to business investment in capital. Thus, the logical outcome of increased spending on physical capital is sustainable economic growth.
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