Investment and Economic Activity
Read this chapter to examine factors that determine private investment and its link to output within the macroeconomy. Private investment plays an important role in the short run by influencing aggregate demand, and in the long run by influencing the rate of growth of the economy.
14.3 Investment and the Economy
- Changes in investment shift the aggregate demand curve to the right or left by an amount equal to the initial change in investment times the multiplier.
- Investment adds to the capital stock; it therefore contributes to economic growth.