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Explain the term- inventory investment
We would have a negative inventory investment whenever inventories decrease. By net investments we mean gross investments minus depreciation such that actual increase in amount of capital between two periods in time is equal to net investment during this period. Keep in mind that when capital is a stock, investment is a flow. We may talk about a firm's total amount of capital at a certain point in time and a firm's total investment over a period of time.
P and Y are both endogenous variables and according to the quantity theory of money we need P.Y = constant. If we divide both sides by P we get Y = constant / P. Because Y = Y D i
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The entire market is capture by a single firm which can produce at a constant average and marginal cost of AC = MC = 10. The firm faces a market demand curve given by Q = 60 ? P.
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