Why does an increase in gross private domestic investment increase aggregate demand and vice versa?
I don't know if this was a concept in Keynesian economins, but my teacher told me that a lack of gross private domestic investment or investment expenditures will eventually lead to a Depression. Why is this? Her statement was right. GPDI was only 4% of the GDP in 1933.
I guess I mean exogenous.. now please elaborate. How and why does GPDI increase aggregate demand when it increases?
Investment best answer:
Answer by Andrew K
This is Keynesian in a sense... it has to do with explaining the great depression as a shock in aggregate demand.
In terms of a model, are you referring to an exogenous or endogenous increase in private investment?
If investment increases exogenously, then, yes, it will lead to an increase in aggregate demand.
Investment
Save Darfur protest at Franklin Templeton Investments
Image by Steve Rhodes
Orignal From: Why does an increase in gross private domestic investment increase aggregate demand and vice versa? and Save Darfur protest at Franklin Templeton Investments
No comments:
Post a Comment