Question

What determines consumption and investment?

Solutions

Verified
Answered 6 months ago

Consumption and investment depend on income i.e. income that after tax. This means that higher the income higher the consumption. Investments depend on the interest rate. For any investment to generate profit, its returns must be higher than the cost of that same investment. When interest rates are higher, money is more “expensive” so not many investments would be profitable thus investments will decline. If interest rates are lower then investment rates will rise.

Create an account to view solutions

By signing up, you accept Quizlet's Terms of Service and Privacy Policy
Continue with GoogleContinue with Facebook

Create an account to view solutions

By signing up, you accept Quizlet's Terms of Service and Privacy Policy
Continue with GoogleContinue with Facebook

Recommended textbook solutions

Principles of Macroeconomics 6th Edition by N. Gregory Mankiw

Principles of Macroeconomics

6th EditionISBN: 9780538453066N. Gregory Mankiw
436 solutions
Principles of Microeconomics 7th Edition by N. Gregory Mankiw

Principles of Microeconomics

7th EditionISBN: 9781285165905 (9 more)N. Gregory Mankiw
883 solutions
Principles of Economics 8th Edition by N. Gregory Mankiw

Principles of Economics

8th EditionISBN: 9781305585126N. Gregory Mankiw
1,337 solutions
Macroeconomics: Institutions, Instability, and the Financial System 10th Edition by N. Gregory Mankiw

Macroeconomics: Institutions, Instability, and the Financial System

10th EditionISBN: 9781319105990 (2 more)N. Gregory Mankiw
270 solutions

More related questions