1. Chapter 17. Investment Homework: pp. 517-18 #1, 4 or 5 Some sections omitted from previous edition. Link to syllabussyllabus

2. The volatility of investment Other text.

3. Fig. 17-1, p. 498. Three Components of Investment

4. Fig. 17-2, p. 499. The Rental Price of Capital

5. Fig. 17-3, p. 503. The Investment Function

6. Fig. 17-4, p. 507. Stock Market and Economic Activity “Predicted seven out of the last five recessions.”

7. James Tobin, 1918-2002 Born in Champaign, Illinois Taught mostly at Yale B.A., Ph.D. at Harvard Nobel prize, 1981 Served in the navy during WWII. Worked in the CEA, Fed’s Board of Governors, and the Treasury Department. Prominent early Keynesian. Highlights in his academic career: Consumption function, many contributions to monetary theory, the proposed Tobin tax – which would restrict short term (speculative) capital flows, Tobit functions in econometrics, his ‘q’ theory of investment. He supported gov’t programs guaranteeing a minimal income.

8. Fig. 17-5, p. 511. The Determinants of Residential Investment.

9. Fig. 17-6, p. 512. An Increase in Housing Demand

10. Figure 17-7 p. 513. Housing Market from 2000 to 2011 Case-Shiller Index of prices Seems to be a strong response in housing starts, to a small price change.

11. Sixth edition? Table 17-1, p. 475 Mortgage payments are ¼ to 1/3 of monthly income, plus tax deductions

12. Accelerator Example Click Depreciation4capital output ratio3 DesiredPreviousGrossDepreciationNetEnd PeriodIncomeCapital Investment of Year Stock stock 142 150150142844146 2521561461046152 3541621521046158 4561681581046164 55416216404-4160 65416216024-2158 74814415804-4154 85215615424-2152 95616815216412164 106018016416412176

13. Fifth Edition? Fig. 17-7, p. 478. Evidence for the Accelerator.