Investment Demand (ID)

Investment demand curve (ID)
What is the shape of the investment demand curve?
downward sloping

Why?

-when interest rates are high, fewer investments are profitable; when interest rates are low, more investments are profitable

Shifts in investment demand (ID)

1. Cost of production

-lower costs shift right

-higher costs shift left

2. Business taxes

-lower business taxes shift right

-higher business taxes shift left

3. Technological change

-new technology shifts right

-lack of technological change shifts left

4. Stock of capital

-if an economy has much capital, then shift left

5. Expectations

-positive expectations shift right

-negative expectations shift left

LRAS: represents a point on a economy's production possibilities curve

-vertical line at an output level that represents the quantity of goods and services a nation can produce over a sustained period using all of it's productive resources as efficiently as possible 

-always at full employment

-it does not change as the price level changes

-shifts outward if there's a change in technology, change in resource, or if there is some economic growth