Anda di halaman 1dari 2

SHIFTS OF THE INVESTMENT DEMAND CURVE

The real rate of interest has an impact on determining which investments can be undertaken
profitably and which cannot. The higher the real rate of interest, the fewer investment opportunities will be
profitable. The main characteristic of investment demand curve is its shifting tendency with the change in
other determinants rather than its downward slope. This relationship applies to all forms of investment:
higher interest rates tend to reduce the quantity of investment, while lower interest rates increase it.
NON-INTEREST-RATE DETERMINANTS
There are factors that will shift the entire Investment Demand Curve. These are noninterest rate
determinants of Investment.
1. Expectations
!"pectations from business are the main cause of shifting of the investment demand curve.
The e"pected rate of return on capital investment depends on firm#s e"pectations of future sales,
future operating costs, and future profitability of the product that the capital helps to produce. These
e"pectations are based on forecasts of future business conditions as well as such elusive and
difficulttopredict factors. $s e"pectations change in a way that increases the e"pected return from
investment, the investment demand curve shifts to the right. %imilarly, e"pectations of reduced
profitability shift the investment demand curve to the left.
http://courses.byui.edu/ECON_151/Presentations/Lesson_06.htm
http://www.transtutors.com/homewor!he"p/macro!economics/interest!rate!in#estment!
re"ationship/in#estment!demand!cur#e!shi$ts/
2. Planned Inventory Changes
$n increase in inventories is a positive investment, while a decrease in investment is a
negative investment. The investment demand curve is only affected by the planned changes the
firms desire to make to their inventories.
3. Level of Economic Activity
&irms need capital to produce goods and services. $n increase in the level of production is
likely to boost demand for capital and thus lead to greater investment. Therefore, an increase in
'D( is likely to shift the investment demand curve to the right.
4. toc! of Capital "oods on #and
)usinesses that already have a significant stock of capital on hand are less likely to invest in
additional capital. $t any given level of the real interest rate, you would e"pect more investment by a
firm that is short on capital goods than by a firm that has an adequate stock of capital on hand.
$. Ac%&isition' (aintenance' and )perating Costs
Initial costs of capital goods, and the estimated operating and maintenance costs of these
goods affect the e"pected rate of return on investment. *hen these costs rise, the rate of return from
investment pro+ects falls causing the investment demand curve shift to the left. Thus, if the costs fall,
the rate of return rises causing the curve to shift to the right.
*. +&siness ,axes
$n increase in business ta"es lowers the e"pected profitability of investments and shifts the
investment demand curve to the left, a reduction of business ta"es shifts it to the right.
-. ,echnological Change
$ business will be more likely to increase investment in an industry where technology is
changing than in an industry with a more fi"ed technology. )usinesses recogni-e the need to keep
up with competitors# utili-ation of modern technology. $t any given level of the real interest rate you
would e"pect Investment Demand to be higher the more technology is advancing.
http://courses.byui.edu/ECON_151/Presentations/Lesson_06.htm
http://www.transtutors.com/homewor!he"p/macro!economics/interest!rate!in#estment!
re"ationship/in#estment!demand!cur#e!shi$ts/

Anda mungkin juga menyukai