Recent surveys of manufacturing firms indicate a significant downturn in business confidence, often described as a dampening of 'animal spirits'. With borrowing costs rising due to central bank interest rate hikes, many corporations are shelving expansion plans. Industry analysts warn that a prolonged contraction in spending on capital goods, such as new machinery and factories, will not only reduce aggregate demand in the short run but also impair the economy's long-run productive capacity.
Define the term 'investment' (Extract K).
222 exam-style questions on AQA A Level Economics 2.2 How the macroeconomy works: the circular flow of income, aggregate demand/aggregate supply analysis and related concepts, covering 2.2.1 The circular flow of income, 2.2.2 Aggregate demand and aggregate supply analysis, 2.2.3 The determinants of aggregate demand, 2.2.4 Aggregate demand and the level of economic activity, 2.2.5 Determinants of short-run aggregate supply, and 2.2.6 Determinants of long-run aggregate supply. Each one has a worked solution and a mark scheme showing where the marks go.