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Lecture 59

ECON 1020 Lecture 59: Lecture 59

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ECON 1020
Ryan A.Compton

o982 Shifts in the Investment Demand Curve: 1. Acquisition, Maintenance, and Operating Costs: Higher costs shift curve left as it effects expected rate of return Higher costs makes expected rate of return lower 2. Business Taxes: Taxes on business investments Increase in business taxes shifts curve left as it effects rate of return after taxes 3. Technological Change: Positive technological change shifts curve right, as it lowers product costs or increase product quantity, and so increases rate of return from investing in the machine 4. Stock of Capital Goods on Hand: When overstocked with production facilities, then the curve will shift left Past overinvestment shifts present function to the left 5. Expectation: If expectations of future sales, costs, or profits improve (increase), the curve will shift right 6. Planned Inventory: If firms plan to increase their inventory, then the curve will shift right FIGURE 86: Shifts in the Investment Demand Curve: Increase in investment demand shift outward right Decrease in investment demand shift inward left Above six factors will cause the curve to shift rightleft Fluctuations of Investment: Investment is volatile (relative to main macro variables) 1. Durability: o Capital goods are durable
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