O Levels Economics (2281)•2281/11/M/J/18

Explanation
Investment Fall Reduces Aggregate Demand Steps:
- Investment spending is a component of aggregate demand (AD = C + I + G + NX).
- A fall in investment decreases AD.
- Lower AD shifts the AD curve left, reducing real GDP.
- Reduced GDP leads to lower production and fewer jobs needed.
Why none are correct:
- A fall in investment decreases, not increases, economic growth via lower AD and GDP. Why D is incorrect (as stated):
- Employment decreases due to reduced business output and hiring, per Okun's law linking GDP drops to unemployment rises.
- B: Exports unaffected directly; depends on net exports, not investment.
- C: Incomes fall with lower GDP and wages.
Not enough information to select an "increase" option—all predict decreases.
Final answer: None
Topic: Economic growth
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