Investment
Investment (I) comprises business spending on capital goods (machinery, buildings, vehicles) to produce future output. It also includes residential investment (house building). Investment is volatile, falling sharply during recessions and rising during booms.
Real World
Jaguar Land Rover invested £15 billion in its Reimagine strategy to shift to electric vehicles by 2025, but delayed factory upgrades in 2022 when Bank of England rate rises pushed borrowing costs above expected returns.
Exam Focus
Emphasise that investment is the most volatile AD component — examiners reward candidates who explain why using business confidence or interest rate transmission.
How well did you know this?