Investment (I)

Cards (10)

What is gross investment?
Investment is an increase in the capital stock, and gross investment is the total expenditure on new capital goods
What is the calculation for gross investment?
Net investment + depreciation
What is net investment?
New additions in capital stock after taking into account the fall of capital assets
What is the calculation for net investment?
Gross investment - depreciation
How does the rate of economic growth affect investment?
If there is an increase in real GDP, then firms will need more capital in order to meet the increased demand, therefore there will be more investment
How do business expectations and confidence affect investment?
If firms expect to sell more in the future, or if business confidence is high, they are more likely to invest currently
How does demand for exports affect investment?
A sustained increase in demand for a country's goods from abroad is likely to stimulate investment
How do interest rates affect investment?
If interest rates increase, investment tends to decrease because it costs more to borrow money in order to invest
How does access to credit affect investment?
Low interest rates likely mean that loans are not likely to be available, so investment will likely be lower as people are not as willing to take a risky investment
How does the influence of the government affect investment?
Government policy could mean that if corportation tax - a tax on profit - is cut, then firms are more likely to invest