Investing contributes to economic growth in which of the following ways?(1 point)

Question

Responses

Investors earn returns money on their investments, which increases their economic well-being.
Investors earn returns money on their investments, which increases their economic well-being.

Investor funds are loaned to firms, who use borrowed funds to purchase capital. Funds from investors are used by firms to purchase capital which leads to economic growth.
Investor funds are loaned to firms, who use borrowed funds to purchase capital. Funds from investors are used by firms to purchase capital which leads to economic growth.

Investors diversify their portfolios to minimize risk in the economy. Investors can invest in a bunch of different stocks to minimize their risk which causes economic growth.
Investors diversify their portfolios to minimize risk in the economy. Investors can invest in a bunch of different stocks to minimize their risk which causes economic growth.

Investors pool their funds into financial intermediaries that earn them larger returns. Investors can invest their money into mutual funds to cause economic growth.

Answer 1

Investing contributes to economic growth primarily through the following ways:

1. Investor funds are loaned to firms, who use borrowed funds to purchase capital. Funds from investors are used by firms to purchase capital which leads to economic growth. This option highlights how investments can facilitate the acquisition of capital goods, which are essential for production and expanding business operations, thus driving economic growth.

While the other options discuss aspects of investing, such as earning returns and diversifying portfolios, their direct connection to fostering economic growth is less pronounced than the one regarding funds being loaned to firms for capital investment.