Assignment Example | Topics and Well Written Essays - 750 words - 111

Assignment Example c) Inflation changes dramatically in the price level. When inflation rises to 4%, buyers will increase the present consumption expenditure and demand price levels raises and money loses its real purchasing power. a) Physical capital refers to the objects used by firms to produce its goods and services. They include machinery, buildings, and equipment. Financial capital refers to resources that are used to purchase those physical objects. The resources come from savings. b) Net investment refers to the amount of actual addition made to the capital stock of economy in a given time, while gross investment refers to the total amount of addition made to capital stock that represent the economy within a given period. c) Types of markets for financial capital include money market, capital market and third and fourth markets, which include foreign exchange, commodity and derivatives market. Their availability and development will depend on the policy a country sets to safeguard the money matters. d) There is a wide swing in prices of goods and services when the interest rates are low. Variation in asset prices changes with interest rates. The business executive knows how to best design ways into meeting the available demands and constant supply of products and services. The increase and decrease in prices of goods depend on profit margins. e) Firms have a number of factors to consider when making an investment decision. They consider the scale of investment, expected returns and the long and short-term effects on investment. The consumer preferences that demand more from the manufacturers usually create an awareness campaign to enhance profitability. f) The determinants of demand for loanable funds are an investment. It changes with interest rates. Those who require putting their money and time into investment in many occasions use loan facilities from banks. g) Household make saving decision by reducing spending and increasing