Investment Demand Curve 

*what is the shape of the investment down 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)

 

cost of production 

• lower cost shift ID->
• high cost shift ID <-

  Business taxes

• lower business taxes shift ID ->
• higher business taxes shift ID<-

  Technological change

• new technology shift ID->
• lack of technology change shift ID<-

Stock of Capital 

• If an economy is low on capital, then ID ->
• If an economy has much capital then ID <-

Expectations

• positive expectations shift ID ->
• Negative expectations shift ID <-

(Long run is always vertical)