In a recession, companies are most likely to adjust their stock of physical capital by:
A. selling it at fire sale prices.
B. not maintaining equipment.
C. quickly canceling orders for new construction equipment.
Hello, what is the correct answer? Why not C is correct? The curriculum says B is correct.
I agree
C would come 1st and then B
from syllabus under “contraction” in “capital spending”
New orders halted, and some existing orders canceled (no need to expand).
Initial cutbacks may be sharp and exaggerate the economy’s downturn. As the general cyclical bust matures, cutbacks in spending on heavy equipment further intensify the contraction. Maintenance scaled back.