Investment

• Investment - Spending on capital goods such as new factories and machinery.
• Fixed capital - Buying assets that are expected to be used over a long period of time
• Working capital - Short term assets that are used up in the production process. (Raw material/components)
• Infrastructure - Motorways, ports, airports, railways
• Human capital - Investment into education and training workers.
• Gross investment - Total investment on capital inputs

  Net investment - Gross investment adjusted for consumption
• Factors effecting the level of capital investment:

  1. Revenue/profit
  2. Business confidence
  3. Availability of credit
  4. Demand (expected and actual)
  5. Attitude to risk
  6. Interest rates
  7. Cost of investment
• Accelerator effect - The relationship between planned capital investment and the rate of change of national income.
• Investment in time period t = capital/output(change in real income during year t)

  It = a(Yt - Yt-1)

  Investment = Capital/output(change in real income) -> all in the same time period.