Credit Constraints on Firms and Investment Volatility
The availability of credit for firms plays a significant role in the clustering and volatility of aggregate investment. In prosperous economic times, financing is more readily available, encouraging a wave of investment projects. Conversely, during downturns, credit becomes tighter, forcing many firms to delay or cancel investments. This cyclical access to credit is another key factor, alongside the postponability of projects, that contributes to the volatile nature of investment spending.
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Introduction to Macroeconomics Course
Ch.3 Aggregate demand and the multiplier model - The Economy 2.0 Macroeconomics @ CORE Econ
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