Procrustean Art of Backtracking: “Downward-Sloping Investment (2)”

 

With regard to the gross domestic investment (I for investment of the national income accounting), we quote the following from Chapter 3 of N. Gregory Mankiw, Macroeconomics:

Investment depends on the real interest rate because the interest rate is the cost of borrowing. The investment function slopes downward: when the interest rises, fewer investment projects are profitable. 

In the reality, there is no way for the rest of us tell money out of GDP (Y= C+ I) from money of liquidity preference, money of “borrowing” or money supply in general

 

Question. With the above said, the real question is what would we choose for the purpose of investing the money in hands?

1)     Whatever the national income accountant enters as the real GDI (I) to the books

2)     The stocks of FAANG

3)     The stocks of Berkshire Hathaway

4)     Residential houses in Florida

5)     Ditto in San Francisco

6)     Treasuries

7)     Solid gold bullion

8)     “Liquidity” preferable to some, but of no use to others (e.g. Irving Fisher, Paul Samuelson and William Nordhaus)

 

Answer. As for the rest of us no macroeconomists, everything except for items 1) and 8).

 

Closing the books of financial accounting:

             Savings from GDP (S) is an infinitesimal drop in the aggregate sources of funds

             Investment in GDP (I) is an infinitesimal drop in the aggregate uses of funds.  

            

             Which is the greater, the dog, tail included, or the tip of tail?