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Krugman's Economics for AP® (High School) | 2nd Edition | ISBN: 9781464122187 | Authors: Margaret Ray
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Solved: Explain why a decline in investment spending caused by a change in business

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QUESTION:

Explain why a decline in investment spending caused by a change in business expectations leads to a fall in consumer spending.

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QUESTION:

Explain why a decline in investment spending caused by a change in business expectations leads to a fall in consumer spending.

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Business expectations are mainly formed by the businesses and even the policymakers, who speculate what will happen to a particular type of business or set of companies in the near future. By analyzing all the factors, strategies are formulated if any unavoidable circumstance arises, like banning the usage of a particular raw material, then the expectations here get shattered, and the businesses need to solve this problem differently.

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