Economics - Investment Spending
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7 Terms
what is investment
addition to the economy’s capital stock
define gross investment
total investment on new capital inputs
define net investment
gross investment - capital consumption
what influences level of investment from businesses
actual and expected demand for goods and services/expected profits/interest rates/business confidence i.e. animal spirits
explain the business accelerator effect
positive relationship between capital investment and the rate of change of national income
e.g. demand is rising quickly, firms use their existing capacity, increase spending on machinery, causes positive accelerator effect
define animal spirits
mix of confidence, trust, mood and expectations
when confidence is low individuals save more because demand profits and lower than expected
why is the level of capital investment important
injection of demand for capital goods/better competitiveness/sustains export-led growth
Note 
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