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Introduction Investment plays an important role in the economy. Because changes in the aim of enthronement can bring about changes in the level of economic activity and economy growth can takings in lower unemployment and higher(prenominal) standards of living. According to Dixon & OMahony, investment can be defined as the spending on mod capital equipment and inventories by blood sector (Dixon & OMahony, 2004). And economic activity can be defined as the total level of output of goods and services over a period of time (Dixon & OMahony, 2004). There are some factors determining the level of investment and increasing in business spending can increase the level of economic activity. involution Rates A change in interest order is the about important factor influence business investment. Interest grade refers to the cost of borrowing to purchases fund for business investment (Dixon & OMahony, 2004), therefore a decrease in interest rates result in the lower cost of borrowing funds, so that business can invest more in new capital equipment. Figure 1 illustrates that if interest rate make pass from 5% to 4%, the planned investment increase from $ ampere-second billion to $120 billion (Taggart, Findlay & Parkin, 2003, pg.493). And this business investment wind shows that interest rates and investment are inversely related.

impose Provisions Also a change in the government indemnity can influence business spending on investment, much(prenominal) as altering tax provisions (Dixon & OMahony, 2004, pg 130). For example, Baumol and unseeing reported that many Republicans want to reduce the tax on capital gains, which would bring about greater investment spending. Moreover, Baumol and snow-blind said, the United States reduce a tax on unified receiptss to urge investment (Baumol & Blinder, 2003, pg.494). That means a higher (lower) tax which levy on capital or profit may reduce (increase) the level of investment. Consumer Demand A change in consumer demand for the products can also determine business... If you want to allow a full essay, order it on our website: Orderessay

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