part 4, 1

Question 1

What are the variables that determine investments?

Answer 1

• estimated profits realized by the new investments.
• future expectations on the macroeconomy
• taxes (fiscal policy) applied by government
• financial cost of investments, determined by interest rate (monetary policy) applied by government but especially the central bank.

Question 2

What is profit?

Answer 2

The difference between estimated revenue realized thanks to investments, and estimated cost incurred to realize the same revenue.

Question 3

Earning is synonymous with what?

Answer 3

Profit.

Question 4

Companies invest if future expectations are positive, which means that ?

Answer 4

• gdp will grow
• gdp per capital will grow
• unemployment rate will fall
• demand for the products the investments is made for will increase (and consequently revenues and profits of the company will increase).

Question 5

Two other variables that determine investments are?

Answer 5

• interest rate (monetary policy)

- taxes (fiscal policy)