2.2.3 - Investment

Question 1

What Is Investment?
(2 Points)

Answer 1

~ When firms spend on capital goods, to increase their productive capacity.

~ Machinery’s value depreciates over time.

Question 2

What Is Gross Investment?

Answer 2

Total amount of spending on capital goods, ignoring the level of depreciation.

Question 3

What Is Net Investment?

Answer 3

Gross investment - depreciation.

Question 4

What Factors Influence The Level Of Investment?
(7 Points)

Answer 4

~ Interest rates.

~ Business confidence.

~ Animal spirts.

~ Level of corporation tax.

~ Level of spare capacity.

~ Level of competition.

~ Price of capital.

Question 5

What Is The Accelerator Effect?

Answer 5

When there is an increase in rate of real GDP, this then encourages further investment.