b) influences on investment

• describe how the rate of economic growth influences the incentive to invest

• higher economic growth

• higher consumption

• higher incentive to invest (to produce more consumer goods)

• describe how business expectations and confidence influence the incentive to invest

• longer period of economic growth

• stronger business confidence

• higher future expectations of profit

• higher incentive to invest (to meet these expectations)

• describe how Keynes’s idea of ‘animal spirits’ influences the incentive to invest

• economic growth

• firm optimism (animal spirits)

• more risk-taking and less rational decision-making

• higher incentive to invest (to adapt to the mood of the economy)

• describe how the demand for exports influences the incentive to invest

• higher demand for exports

• higher incentive to save (to produce more consumer goods and meet global demands)

• describe how interest rates influence the incentive to invest

• lower interest rate

• higher incentive to borrow

• higher incentive to invest

• describe how access to credit influences the incentive to invest

• higher access to credit

• higher incentive to borrow

• higher incentive to invest

• describe how the influence of governments and regulations influences the incentive to invest

• imposition of subsidies

• higher incentive to invest