Investment Defined as addition to the capital stock of the economy Factories, machinery Not purchase of shares, putting money in the bank etc. This is.

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Presentation transcript:

Investment Defined as addition to the capital stock of the economy Factories, machinery Not purchase of shares, putting money in the bank etc. This is often called “investment” but for economists this counts as saving Investment, yes or no: Building a factory? HS2 project? Yes, government investment Buying a government bond so the government can build HS2? Buying iPads for students in a school? Is ‘investment’ a stock or a flow concept?

Gross and net investment Existing capital stock ‘depreciates’ as it wears out over time and needs replacing How long do pcs last? If SHS has 400 pcs, how many does it need to buy each year on average to replace old ones? If SHS buys 150 each year: Gross investment is 150; Depreciation or ‘capital consumption’ is 100 Net investment is 50 Gross investment = total investment Net investment = gross investment - depreciation

What influences investment Rate of economic growth Including export growth Business expectations / confidence (Keynes ‘animal spirits’) Interest rates Availability of credit (Retained) profits Government regulations and taxation