Lecture 10 Investment -...

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ECO 320L, Fall 2010, Professor Beatrix Paal updated 9/17/2010 9:57 AM Lecture 10: Investment 1 Lecture 10 Investment Last time ± the consumption/saving choice ( Chapt e r s 4 . 1 and 4 . A ) Today ± investment ( e r 4 . 2 ) Next time ± summary of the goods market ± goods market equilibrium ( e r 4 . 3 ) ± TFP shocks and the goods market ( e r 4 . 3 ) Investment and capital accumulation In macroeconomics, investment means ± purchase or construction of capital goods (machines, residential and non- residential structures, equipment, software) ± additions to inventory Capital accumulation equation ± the capital stock of the economy increases through investment ± net vs. gross investment ± I : gross investment ± į K : depreciation; assumed to be proportional to the capital stock ± ± į : net investment (1 ) ±² G ² f
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ECO 320L, Fall 2010, Professor Beatrix Paal updated 9/17/2010 9:57 AM Lecture 10: Investment 2 Why study investment? ± recall goods market equilibrium condition: investment is the second component of aggregate demand needed to understand the goods market ± empirically, fluctuations in investment represent about half of business-cycle fluctuations in output ± investment is the source of increases in the long-run productive capacity of the economy 3 () ±±± d Y C I G NX ABC Figure 4.6 Gross and Net Investment 1929 Ō 2008
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This note was uploaded on 10/25/2010 for the course ECO 320L taught by Professor Kendrick during the Fall '10 term at University of Texas at Austin.

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Lecture 10 Investment -...

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