ECON
Ch 18 Investment (2).pdf

Ch 18 Investment (2).pdf - Investment Chapter 18 1 What you...

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7/16/2017 1 Investment Chapter 18 1 What you will learn in this chapter The determinants of investment in greater detail Three components of investment: business fixed investment, residential investment, and inventory investment. Investment under financing constraints. Tobin’s q theory of investment. 2
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7/16/2017 2 Introduction Investment is a smaller component of GDP, but it is the most volatile component of GDP – strongly pro-cyclical. 3 Introduction Three components of aggregate investment: Business fixed investment : businesses’ spending on equipment and structures for use in production. Residential investment : purchases of new housing units (either by occupants or landlords). Inventory investment : the value of the change in inventories of finished goods, materials and supplies, and work in progress. 4
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7/16/2017 3 Canada's Investment, 1970-2012 5 18-1 Business Fixed Investment Two models: 1. The neoclassical model of investment 2. Tobin’s q model of investment 6
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