Ikea To Invest More Than $3B In Stores

EconEye Admin

4 years ago

Ikea is investing about $3.2 billion in its physical locations to make them more adaptable to online orders. The company also announced that new stores in Stockholm and Toronto will open soon.—constructiondive.com

Some Data

In the first quarter of 2022, U.S. business investment increased from $2,906 billion to $2,969 billion.

Answer the following questions to check your understanding of the story.

Why is Ikea investing in existing stores and building new stores now?

a) The nominal interest rate is low.

b) Financial institutions want to lend the necessary funds in today’s economic climate.

c) Ikea expects its investment will return a positive net present value.

d) Ikea has generated sufficient revenue to pay for renovations and new stores.

What determines Ikea’s investment and its demand for loanable funds to finance it? What does Ikea want to receive from its investment?

Ikea’s investment decisions are based on its expected profit. If the net present value of the investment is positive, then Ikea makes the investment.

What is the effect of the increase in U.S. business investment in the first quarter of 2022 on the real interest rate and private saving?

The real interest rate ______________ and private saving ______________.

a) rises; increases

b) falls; increases

c) falls; decreases

d) rises; decreases

U.S. firms go to the loanable funds market to finance their investment, and Ikea is one of these many firms. The demand for loanable funds increases. Does the real interest rate rise or fall? A movement occurs up along the supply of loanable funds curve. How does private saving change?

U.S. firms go to the loanable funds market to finance their investment, and Ikea is one of these many firms. The demand for loanable funds increases. The real interest rate rises, and a movement occurs up along the supply of loanable funds curve. Private saving increases.

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