Exercise 4: The Investment Function

Part 1: Definition of Terms

1. Business
A business is an organization or enterprising entity engaged in commercial, industrial,
or professional activities.

2. Investment
It is a process of increasing the capital stock and the expenditure in which it
determines the income and production in the economy.

3. Output
The act of producing something, the amount of something that is produced or the
process in which something is delivered.

4. Saving-investment equilibrium
It implies that increasing, decrease or maintaining the level of investment
expenditure will respectively increase, decrease, or maintain the level of income and
savings, assuming all other factors remain constant.

5. Interest rate
It is the particular amount of interest which a household or business is required to pay
to a lender for borrowing a particular sum of money to finance spending on
consumption and investment.

6. Innovation
It is the introduction of an familiar product and untested technology; opening a
country’s product to markets and sources of raw materials not previously
encountered; and setting up of a new organization in any industry.

7. Gross investment
It is the amount a company has invested in an asset or business without factoring in
depreciation.

8. Profit
The basic reason why a business invests and, therefore, profit tends influence
business investments in a long periof of time.

9. Net investment
It is the total amount of money that a company spends on capital assets, minus the
cost of the depreciation of those assets.

10. Expectations
A businessman generally invest because he expects a certain level of profit given
certain influence of the business environment.

https://pages.uoregon.edu/gevans/isb304053.pdf
https://bizfluent.com/how-6902083-calculate-gross-investment.html
https://www.ecnmy.org/learn/your-future/technology-innovation/what-is-innovation/
https://www.yourdictionary.com/output
https://www.pitt.edu/~mgahagan/MacroExam2SelfTest.Answers.pdf
https://www.investopedia.com/terms/b/business.asp