Investment 2.2.3

Question 1

influence of economic growth on investments

Answer 1

in there is an increase in RGDP, then firms will need to invest more capital in order to meet the increased demand. so an increase in RGDP causes an increase in I

Question 2

influence of interest rates on investments

Answer 2

if there is a rise in interest rates, then investments tend to fall as borrowing becomes more expensive. more opportunity costs.

Question 3

influence of access to credits on investments

Answer 3

investments will be lower if there is high risks attached to it, as it means that there will be less access to credits and interest rates will make it higher. in recession, it is usually difficult to access credits as risks are higher and banks become more risk aware, fearing firms will not be able to pay the money back.