Investment

Question 1

What factors affect investment

Answer 1

Business confidence
Income tax (Corporate tax for businesses)
Interest rates

Question 2

Ways to finance investments

Answer 2

Retained profits
Borrowing

Question 3

Different types of capital investment

Answer 3

Human Capital-workers
Physical capital-property,machinery,land

Question 4

Chain of reasoning for a rise in interest rates on investment

Answer 4

interest rates increase-cost of financing investments increases-leads to decreased profits-decreased incentive to invest-investments by firms decrease-fall in AD

Question 5

Chain of reasoning for a fall in interest rates on investment

Answer 5

interest rates increase-cost of financing investments decreases-leads to rise profits-increased incentive to invest-investments by firms increase-rise in AD

Question 6

Chain of reasoning for a rise in corporate tax on investment

Answer 6

corporate tax increases-lower profits after tax-decreased funds available to finance capital investment-decreased incentive to invest-investments by firms decrease-fall in AD

Question 7

What is corporate tax

Answer 7

Tax on the profits of a business/organization

Question 8

Chain of reasoning for a rise in business confidence on investment

Answer 8

rise in business confidence due to better expectations about the economy-investments by firms increase-increase in AD