Basic accelerator

Question 1

Examples of capital investment

Answer 1

Robotic
Integrated Plant
Machine tools
Infrastructure
Software
Logistics

Question 2

Investment spending

Answer 2

Investment is about the purchase of capital to add to the economy’s capital stock

Question 3

Savings

Answer 3

The total amount of income not consumed by households, business or the government

Question 4

Capital investment

Answer 4

Spending on machinery, equipment, factories, technology and infrastructure to create new capital goods

Question 5

Gross investment spending

Answer 5

The total amount the economy spends on new capital. This figure includes an estimate for the value of capital depreciation since some investment is needed to replace technologically obsolete or worn out plant and machinery.

Question 6

Net investment

Answer 6

Gross investment - capital depreciation

Question 7

Positive net investment

Answer 7

Businesses have a higher productive capacity - meet rising demand in the future

Question 8

Factors influencing planned business investment

Answer 8

Actual and expected demand for goods and services
Expected profits and business taxes
Interest rates and availability of business finance
Business confidence
Planned investment tends to rise when firms expect rising demand and have limited spare capacity to supply goods and services

Question 9

How the UK government can increase business investment

Answer 9

The government can increase investment by lowering corporation tax or offering other tax incentives as part of their fiscal policy.

Question 10

Accelerator effect

Answer 10

A positive relationship between planned capital investment and the rate of change of national income

Question 11

Animal spirits

Answer 11

Refers to a mix of confidence, trust, mood and expectations

Question 12

Significance of investment for the economy

Answer 12

Injection of demand for capital goods industries
Investment can lift productivity/incomes
Economies of scale and better competitiveness
Investment helps to sustain export-led growth