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In macroeconomics, investment "consists of the additions to the nation's capital stock of buildings, equipment, software, and inventories during a year" [1] or, alternatively, investment spending — "spending on productive physical capital such as machinery and construction of buildings, and on changes to inventories — as part of total ...
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- Marginal Efficiency of Capital
- Factors Which Shift The Planned Investment Schedule
- Loanable Funds Theory
The rate of return for an investment project is known as the marginal efficiency of capital. The cost of capital or investment is related to the rate of interest for 2 reasons: 1. The rate of interest shows the cost of borrowing money to fund investment 2. The alternative to investing is saving money in a bank, this is the opportunity cost of inves...
1. A change in the cost of capital, E.g. an increase in the cost of capital will lead to a fall in investment 2. Technological change, If new technology is invented firms will want to invest more. 3. Expectations and business confidence. Keynes believed this was very important. Keynes termed it “animal spirits” 4. Government Policy. E.g. the govt c...
In an economy, the interest rate will be determined by the supply of finance (loanable funds) and the demand for loanable funds 1. The supply of finance is the level of savings in the economy. 2. When people deposit money in banks these funds can be lent out to firms for investment in physical capital 3. Higher interest rates will encourage people ...
Macroeconomics. Production and national income: Macroeconomics takes a big-picture view of the entire economy, including examining the roles of, and relationships between, firms, households and governments, and the different types of markets, such as the financial market and the labour market. Macroeconomics is a branch of economics that deals ...
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Dec 15, 2023 · Macroeconomics is a branch of the economics field that studies how the aggregate economy behaves. In macroeconomics, a variety of economy-wide phenomena is thoroughly examined such as, inflation ...
