Cards (44)

    • Investment is defined as spending by firms on capital goods to increase productive capacity.
    • Gross investment refers to total spending on capital goods after depreciation is considered.
      False
    • Net investment is calculated by subtracting depreciation from gross investment.
    • Match the component of investment with its example:
      Fixed Capital Formation ↔️ Purchasing new machinery
      Inventory Investment ↔️ Stocking up on seasonal products
      Residential Investment ↔️ Building a new apartment complex
    • Lower interest rates encourage firms to invest as borrowing becomes cheaper.
    • Firms are more likely to invest if they are optimistic about future demand and economic conditions.
    • Technological advancements can make existing capital more efficient, reducing the need for new investment.
      False
    • Government policies such as tax incentives can encourage firms to invest.
    • Match the factor influencing investment with its effect:
      Interest Rates ↔️ Increases with low rates
      Business Confidence ↔️ Increases with optimism
      Government Policies ↔️ Can increase or decrease
    • Lower interest rates lead to cheaper borrowing costs, which encourages investment.
    • High business confidence indicates firms are pessimistic about future economic conditions.
      False
    • Technological advancements encourage investment by making existing capital obsolete.
    • A decrease in interest rates can lead to an increase in investment as firms take advantage of cheaper borrowing.
    • Factors influencing investment decisions can affect components such as fixed capital formation and inventory investment.
    • What is the effect of lower interest rates on investment decisions?
      Encourages borrowing and investment
    • Firms are more likely to invest if they are optimistic about future economic conditions.
    • Technological advancements can make existing capital obsolete
    • Match the factor with its effect on investment:
      Interest Rates ↔️ Increases with low rates
      Business Confidence ↔️ Increases with high confidence
      Technological Advancements ↔️ Can increase investment
      Government Policies ↔️ Can increase or decrease
    • Lower interest rates decrease the cost of borrowing.
    • What is the role of business confidence in investment decisions?
      Optimism about future demand
    • Technological advancements often encourage firms to invest in newer, more efficient capital
    • Government policies always encourage investment regardless of their nature.
      False
    • What is the definition of investment in economics?
      Spending by firms on capital goods
    • Net investment is calculated by subtracting depreciation from gross investment
    • Match the investment concept with its role in aggregate demand:
      Gross Investment ↔️ Increases AD and productive capacity
      Net Investment ↔️ Reflects actual increase in productive capacity
      Investment (I) ↔️ A key component of AD
    • What is fixed capital formation?
      Spending on capital goods
    • Inventory investment refers to changes in the level of raw materials, work-in-progress, and finished goods
    • Residential investment includes spending on new homes and renovations.
    • How do low interest rates influence investment decisions?
      Encourage borrowing and investment
    • High business confidence leads to optimism about future demand
    • Describe the relationship between investment and interest rates.
      Inverse
    • Lower interest rates make borrowing cheaper, encouraging investment.
    • What are the three main types of government policies that promote investment?
      Tax incentives, subsidies, regulations
    • Reduced taxes on profits or capital gains act as a tax incentive
    • Match the government policy with its example:
      Tax Incentives ↔️ Tax breaks for renewable energy
      Subsidies ↔️ Grants for high-tech research
      Regulatory Environments ↔️ Streamlining building permits
    • What is the formula for calculating aggregate demand?
      AD=AD =C+ C +I+ I +G+ G +(XM) (X - M)
    • Fixed capital formation includes spending on capital goods like machinery and buildings
    • Inventory investment involves changes in the level of raw materials, work-in-progress, and finished goods.
    • What is residential investment?
      Spending on new homes
    • How do low interest rates affect the cost of borrowing?
      Lower borrowing costs