investment and spending Flashcards
which component in aggregate demand is the most volatile
investment
what is the equation for aggregate demand
AD = C + I + G + (X-M)
what are capital goods
goods that are used to make consumer goods and services
what are some examples of capital goods
robotics, software, machine tools, logistics etc
what are the key factors affecting capital investment
actual and expected demand
expected profits and taxes
interest rates + availability of business finance
business confidence (animal spirits)
government priorities for infrastructure spending
what does the term animal spirits mean
it describes fluctuating confidence/pessimism of investors in business.
what is the importance for investment in the UK
improves productivity
can create jobs
businesses remain internationally competitive
investment can control inflation
stimulates the economy and can increase growth
can help meet environmental targets
how does investment improve productivity
workers have more advanced technology
how does investment create jobs
someone must manufacture the capital goods and infrastructure projects create jobs
how does investment mean businesses remain internationally competitive
other countries will be investing at the same time
how does investment control inflation
it creates additional supply keeping prices low so investment can reduce supply shortages
what are some environmental targets that investment helps to reach
e-vehicles, charging stations, green energy capacity
why does the public sector raise money
to spend it on providing public services, capital investment and cash transfer payments
in 2024-2025 how large will public spending be
44% of national income
what is the largest government spending sector
other
