AD Investment

Question 1

what is investment (2)

Answer 1

1. the purchase of capital goods which are then used to create other goods and services
2. the amount of money businesses are investing into the economy through purchase of capital goods

Question 2

what is human capital

Answer 2

investment in education and the training of workings = they will work more effectively

Question 3

what is physical capital

Answer 3

investment in factories, offices, machinery, shops etc.

Question 4

what are the influencing factors of investment (7)

Answer 4

1. rate of economic growth
2. business confidence
3. animal spirits
4. demand for exports
5. access to credit
6. Interest rates
7. government and regulations

Question 5

how does the rate of economic growth affect investment

Answer 5

economic growth increases = GDP increases = more products and services are being produced = more money flowing around economy = businesses will have more money to invest = more investment

Question 6

how does business confidence affect investment

Answer 6

businesses feel confident about the future of the economy = more likely to spend money on investment

Question 7

how does animal spirits affect investment

Answer 7

investment sometimes happens due to ‘gut instinct’ aka have a ‘good feeling’ about what is going to happen

Question 8

how does demand for exports affect investment

Answer 8

demand for UK export increase = foreign businesses make more profit = use this money to invest in economy

Question 9

how does access to credit affect investment

Answer 9

businesses have easier access to loans = more likely to invest

Question 10

how does interest rates affect investment

Answer 10

higher interest rates for businesses =not getting a loan = less likely to invest

Question 11

how does government and regulations affect investment

Answer 11

if the government have a lot of regulation, tax and laws = harder for businesses to invest