Volatility In Investment Essay

800 Words4 Pages
The factors that contribute to the volatility of investment spending in investment are changes in interest rates. Interest expense is a cost of making an investment. Therefore, it will affect the profitability of potential investments. Other than that, expectations about the state of the economy in the future also causes this volatility in investment. When firms are optimistic about the future, investment spending increases, and vice versa. Marginal efficiency on investment (MIE) also contributes to the volatility of investment spending in investment. MIE is the expected rate of return over cost of an additional unit of a capital good. When MIE increases, investment spending increases because firms believe that they will get a higher return…show more content…
The shortcomings of GDP as a measure of society’s well-being and standard of living are the exclusion of non-market activities. These activities do not occur in the market. They are productive actions that are done voluntarily or with mutual aid such as house chores and carpenters fixing their own furniture. Since there are no financial transactions, they are excluded in the calculation of GDP. The other shortcoming of GDP is the underground economy. It basically refers to financial activities that are not reported to the Inland Revenue Board. They can be legal works being practised unofficially on account of the benefit that results to it not being reported. Usually those people who are involved in this matter are gamblers, smugglers or drug dealers which is obvious why they conceal their income. Apart from that, GDP excludes leisure. In recent years, the working hours were reduced to great extent like in the US, weekly working hours were reduced from 56 to 36. Leisure certainly improves employee performance. However, leisure is not a part of GDP although it is quite clear that people are working less and producing more outputs which shows improvement in productivity and well-being of people. GDP also fails to take into account the noneconomic resources of well-being. Income of households does not indicate their happiness. The same goes with GDP. Higher GDP never guarantees that individuals and households are happy and satisfied. A reduction in crime and violence, peaceful relationship, parents and children with better understanding and a reduction in drug and alcohol abuse could lead to happiness and
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