CHAPTER 25 INVESTMENT

Question 1

Accelerator coefficient

Answer 1

The capital output radio

Question 2

Accelerator theory

Answer 2

The theory that level of investment is related to past changes in income

Question 3

Capital output radio

Answer 3

The ratio between the amount of capital needed to produce a given quantity of goods to the level of output

Question 4

Depreciation (of the capital stocks) or capital consumption

Answer 4

The value of the capital stock which has been used or worn out.

Question 5

Gross investment

Answer 5

The addition to capital stock, both to replace the existing capital stock which has worn out and the creation of additional capital.

Question 6

Investment

Answer 6

The addition to the capital stock of the economy

Question 7

Net investment

Answer 7

Gross investment minus depreciation

Question 8

Retained profit

Answer 8

Profit kept back by a firm for its own use which is not distributed to shareholders or used to pay taxation