Investment 2.2.3 Flashcards
1
Q
Define investment
A
the purchase of goods that are not consumed today but are used in the futuree to create wealth. investment is the addition to capital stock of the economy eg: factories, machines or any item that is used to produce othern good or services.
2
Q
What is Gross Investment?
A
It is total amount the economy spends on new capital.
3
Q
What is Net Investment
A
It is Gross Investment adjusted for the depreciation of capital.
4
Q
What is the formula for Aggrigate Demand?
A
AD=C+I+G+(x-m)
5
Q
What is the accelarator effect?
A
The investment levels are related to the rate of change of gdp. An increace in the rate of economic growth will cause a correspondingly larger increace in the level of investment but a fall in investment levels.
