Help
Options
Didn't know it?
click below
click below
Knew it?
click below
click below
Don't Know
Remaining cards (0)
Know
retry
shuffle
restart
0:00
Embed Code - If you would like this activity on your web page, copy the script below and paste it into your web page.
Normal Size Small Size show me how
Normal Size Small Size show me how
Economics 2.2.3
Economics- Edexcel 2.2.3
| Question | Answer |
|---|---|
| investment | spending on capital goods including plant & machinery and infrastructure |
| what can business investment include? | cultivated assets, intellectual property products and other buildings or structure |
| cultivated assets | animals and plants that are managed by humans and that provide repeat products to their owners |
| financial capital | funds which are available to finance the production or acquisition of real capital |
| gross investment | total investment on new capital inputs |
| net investments | gross investment adjusted for capital consumption(depreciation) as some new investment is needed each year to replace worn out machinery |
| gross investment is higher than capital consumption | net investment is positive and the size of an economy’s capital stock grows |
| factors affecting the level of private sector investment spending | actual and expected demand/cost of capital(rate of interest on loan or opportunity cost)/business taxes(post-tax returns on projects)/state of business confidence(animal spirits)/pace of changing tech |
| Keyne’s animal spirits | refers to a mix of confidence, trust, mood and expectations which fluctuate quickly as communities change their thinking |
| animal spirits when confidence is low | individuals and businesses save more and as demand and profits are less, cut back on production and postpone/cancel capital investment projects(economic activity will suffer) |
| paradox of thrift | higher saving and reduced investment reduce demand and incomes in the circular flow so there is an economic contraction |
| accelerator effect | relationship between planned investment and rate of change of national income |
| positive accelerator effect | a given change in demand for consumer goods and services causes a bigger percentage change in demand for capital goods, expecting sustained demand firms increase spending and investment to increase supply capacity |
| negative accelerator effect | when demand in an industry slows, net investment spending by businesses falls |
| infrastructure | the basic physical systems of a business, region, or nation and often involves the production of public goods or production processes |
| UK infrastructure | UK lacks in quality of infrastructure assets |
| why does the UK lack in infrastructure? | projects have large upfront costs but benefits that add up over the years |
| why do we need infrastructure? | demand on infrastructure rises along with economic growth and growing population/potentially high multiplier effects from investment projects, increasing AD and jobs/lack may discourage FDI/increases the capital stock and productive potential |
| FDI | foreign direct investment |
Created by:
jessharris
Popular Economics sets