Inflation= Implication/ Output independent of changes in the price level
Investment: Money spent on
- Factories
- Equipment/ Machinery
- Technology (Hardware and software)
- New homes
- Inventories (goods sold by producers)
Expected rate of return
- Cost analysis
- Benefits of rate of return
- Interest cost
- Amount of investment
Nominal is the observable rate of interest. Real subtracts out of inflation and is only known ex post facto.
r%= i%- pi%
*Real interest rate= r%
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