Investment Demand Graph
Notes from 2/22/16
Real (r%) v. Nominal (i%)
Difference: Nominal is the observable rate of interest, real subtracts out inflation (∏%) and is only known ex post facto
Real Interest Rate (r%) = i% - ∏%
What determines cost of an investment decision?
-Real Interest Rate (r%)
Investment Demand Curve
Downward Sloping- When investment rates are high, fewer investments are profitable
- When investment rates are low, more investments are profitable
Shifts in ID
- Cost of Production-
- Lower = Shift →
- Higher = Shift ←
- Business Taxes
- Lower = Shift →
- Higher = Shift ←
- Technological Changes
- New Technology = Shift →
- Lack of Tech Change = Shift ←
- Stock of Capital
- Economy Low on Capital = Shift →
- Economy With Much Capital = Shift←
- Expectations
- Positive Expectations = Shift →
- Negative Expectations = Shift ←
-JaelyNoTainted
Like Jaelyn (SPACE) Not (SPACE) Tainted
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