Unit 3 Notes - February 23rd, 2016

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 possible.

Shifts in Investment Demand

Cost of Production:

·         Lower costs shift ID to the right.

·         Higher costs shift ID to the left.

Business Taxes:

·         Lower Business Taxes shift ID to the right.

·         Higher Business Taxes shift ID to the left.

Technological Change:

·         New Technology shift ID to the right.

·         Lack of Technology shift ID to the left.

Stock of Capital:

·         Low on Capital shifts ID to the right.

·         Much Capital shifts ID to the left.

Expectations:

·         Positive Expectations shift ID to the right.

·         Negative Expectations shift ID to the left.