Investment Flashcards

0
Q

What is depreciation

A

The drop in value of something you have invested in.

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1
Q

Define investment

A

The addition to capital stock (i.e. Firms investing in machinery)

This is usually a physical investment but can also be financial.

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2
Q

How do we calculate depreciation?

A

Price
———–
Lifetime

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3
Q

What are the main determinants of investment?

A
  • Retained profit if the business
  • Payback time
  • Inflation (if higher, borrow money to source investments)
  • Expectations
  • Interest rates (most business’ borrow money to source investments)
  • Opportunity cost
  • Risk & return
  • Costs (government subsidies get rid of these)
  • State of the economy (a growing economy sees greater investment)
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