If GDP is confidently expected to grow at a rapid 4% rate this year, how do you predict investment spending will change? Is it likely to grow faster than, slower than, or at the same rate as GDP? Why? Based on this expectation, investment spending is likely to by 4%. A rapidly growing economy will generally make business people optimistic, expectations about potential future profits. As a result, they are eager to invest.

A rapidly growing economy will generally make business people more optimistic, with higher expectations about potential future profits. As a result, they are more eager to invest.

Investment will increase higher than 4% because in a growing economy like this, people will be so optimistic that they would invest huge sums to capitalize on the growth and earn some returns.

This rate of increase would be greater than GDP because GDP is based on multiple factors including investment therefore those factors like government spending would have to increase as well.

dubeyshailja64 dubeyshailja64 · Answer 2 · 2022-04-01T07:57:02+02:00

If the GDP is expected to be increased by 4%, the investment spending are likely to be increased by more than 4%.

In the rapid growing economy the investors are generally more optimistic they have higher expectations about the future potential profit as a result they will be more eager to invest.

What is GDP?

GDP or gross domestic product final value of goods and services produced which is the economy during a financial year. The GDP excludes the value of intermediate consumption to avoid the problem of double counting.

An increasing GDP positively effect the investment spending as the people in the economy are optimistic about the future profit and hence will be eager to invest huge sums to make bigger profits.

Therefore rate of increase in investment spending will we more than 4% when the rate of GDP increases by 4%.

Learn more about GDP here:

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