人民大学：《宏观经济学》（英文版） Lecture 18 Intermediate Macroeconomics

Intermediate Macroeconomics Lecture 18

Intermediate Macroeconomics Lecture 18

Investment . Business fixed investment Equipment and structures that businesses buy to use in production . Residential investment New housing that people buy to live in and that landlords buy to rent out Inventory investment Goods that business put aside in storage, including materials and supplies, work in process, and finished goods

Investment ❖ Business fixed investment Equipment and structures that businesses buy to use in production ❖ Residential investment New housing that people buy to live in and that landlords buy to rent out ❖ Inventory investment Goods that business put aside in storage, including materials and supplies, work in process, and finished goods

Investment Component of I (3Q, 2004, US) nonresidential i in structures nonresidential I in equipment and softwarel 日 residential i a change in inventories

Investment Component of I (3Q, 2004, US) nonresidential I in structures nonresidential I in equipment and software residential I change in inventories

Investment Component of I (China, 2001) 口建筑安装工程 口设备工具器具购置 口其他费用 口存货投资变动

Investment Component of I (China, 2001) 建筑安装工程 设备工具器具购置 其他费用 存货投资变动

Business fixed Investment Neoclassical model of investment >I. MPK.i-rate, tax rules Production firms rental firms

Business Fixed Investment ❖ Neoclassical model of investment ➢ I, MPK, i-rate, tax rules ➢ Production firms & rental firms

Business fixed Investment .o The rental price of K(production firms) MC=MB MB: how many products 1 unit K generates ---MPK MC: how many products 1 unit K costs ---(R/P) MPK-R/P

Business Fixed Investment ❖ The rental price of K (production firms) MC=MB MB: how many products 1 unit K generates --- MPK MC: how many products 1 unit K costs --- (R/P) MPK=R/P

Business fixed Investment 冷 Assumption: MPKi as K↑ K supply R/P MPK SKS

Business Fixed Investment ❖ Assumption: MPK↓ as K ↑ R/P K K supply MPK

Business fixed Investment %o Cobb-Douglas production function Y=AK I-a MPK=a.AKa-lLl-a=aA. ia K

Business Fixed Investment ❖ Cobb-Douglas production function  − = 1 Y AK L      − − −       =  =   1 1 1 K L MPK AK L A

Business fixed Investment The cost of K(rental firms) You purchased a car for RMB150,000 and start up your car-rental business. 1 yr later, the same car is sold at rMb100,000. The depreciation rate for the car in the 1 st yr is 30%.The market i-rate is 2% What is the cost of your business this yr?

Business Fixed Investment ❖ The cost of K (rental firms) You purchased a car for RMB150,000 and start up your car-rental business. 1 yr later, the same car is sold at RMB100,000. The depreciation rate for the car in the 1st yr is 30%. The market i-rate is 2%. What is the cost of your business this yr?

Business fixed Investment 1. Interest cost-i·fk 2. Change in P of K-△BiPk-△ABR+6Pk 3. Depreciation ---8 PK △P Cost of k:i·Pk-AP+o·Pk=PR(--+)=P(r+8)

Business Fixed Investment 1. Interest cost --- 2. Change in P of K --- 3. Depreciation --- Cost of K: PK i PK PK PK PK i − +   ( + ) = ( + )   −  +  = − P r P P i P P P P i K K K K K K K PK  