Econ 102 CH6
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5 Terms
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Types of Investment
Business investment
new capital assets
Inventory Investment
spending on raw materials, unsold goods
Housing investment: spending on building/improving houses/ apartments
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What determines Capital Investments
Cost of investment
present values of benefits > present value of the cost
Rational Rules for investors: (Next year’s Revenue)/(r+d)> cost
Return to the investment
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Market For Loanable Funds
determines the long-run real interest rate and quantity of investment
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Interest Rate
Long-run
evolves slowly over many years to the balance of saving and investment
Short-run
changes each month with adjustments from the bank of Canada
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Note 
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