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Interest Rates

Interest Rates

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Published by Amanda Brown
Interest Rates
Interest Rates

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Published by: Amanda Brown on May 15, 2013
Copyright:Attribution Non-commercial


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Interest Rates &Investment Demand
AP Macroeconomics
What is Investment?
Money spent or expenditures
New plants (factories)
Capital equipment (machinery)
Technology (hardware & software)
New Homes
Inventories (goods sold by producers)
Expected Rates of Return
How does business make investment decisions?
Cost / Benefit Analysis
How does business determine the benefits?
Expected rate of return
How does business count the cost?
Interest costs
How does business determine the amount ofinvestment they undertake?
Compare expected rate of return to interest cost
If expected return > interest cost, then invest
If expected return < interest cost, then do not invest

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