705 Capital Formation

investmentWe have seen equilibrium in the goods markets through the AE function and equations. This is just the beginning of the entire focus that we call the ISLM model. If you have a clear understanding of whatever we have just gone through in the previous 4 videos, congratulations! You are on your way to mastering macroecons and your dedication and optimism will bring you far! If you find yourself lacking behind slightly, fret not because there is still time to catch up. Remember to watch the videos again and discuss with your friends! Most importantly, believe that you can!

We are almost reaching the point where we derive our IS model. But wait, There is yet ANOTHER WAY of looking at the equilibrium in the goods market. We will look at this in terms of INVESTMENT being a function of several other factors, which you will soon see in the video. This is an extremely useful tool when we are looking at how the IS curve moves so take note of this! It is a very short video with very simple equations, so I’m sure you’ll get it the first time.

We will be looking at how to implement this CAPITAL FORMATION EQUATION in the later videos and you will see how important it is as an analytical tool!


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