Macroeconomics/Investment

Investment

Investment is the expenditure(E) on new capital equipment which will be used to produce final goods & services(g+s) in the future. It includes building construction, housing, etc.

Factors Affecting Investment:

The level of I is the most volatile component of AE, particularily because it is forward planning/focused.

Determinants

The level of investment in the economy is determined by:

(T) → Taxation (W) → World events (I) → Inflation (G) → Government policies (I) → Interest rates (S) → Stocks (P) → Past profits (E) → Expectations (C) → Competition think TWIGISPEC!

• Private sector investment comprises 10-20% of AE.