Investment Demand

I.            Investment

a.      New factories

b.      Machinery

c.       Technology

d.     New homes

e.      Inventory

II.            Expected rate of return (ERR)

a.      Cost v. benefit

b.      Interest cost (IC)

c.       ERR - IC = + (good)

d.     ERR - IC = - (boo boo)

e.      Real interest rate = nominal interest rate - interest rate

f.        r= I - π

III.            Investment Demand Curve

a.      Inverse slope

b.   

IV.            Shifts in the Investment Demand

a.      Cost of production

                                i.            Lower costs = ID -->

                              ii.            Higher costs = ID <--

b.      Business taxes

c.       Technological change

d.       Expectations