 So far we have discussed two components consumption and government purchases or government expenditure. Now the third component is investment. Investment is of two types, one is the expenditure of businesses and the other is the expenditure of the business sector and the other is the expenditure of the firms. Now this is a fixed investment, an inventory investment. What is a fixed investment? Firm plants, firms invest in machines, equipment, tools, factories, new residential investment We take all of these in a fixed investment. In this, the newly constructed houses have to be included. In this, the inventory investment is that the businesses sometimes have extra raw material so that when raw material is suddenly finished during production, there is no delay in the process, so they have an extra stock. Sometimes the output is produced, but when we are maintaining accounts for a year, the main product of that year is raw material. The output of the product has been produced. But until we close the accounts for a year, there is no sale in the market. So whether it is finished items or raw material, we call it an inventory investment. And remember that inventories are available to every firm, so how does the investment be measured? Every year we see how much change has been made. To clarify one thing, if you look at the total investment, then the portion of the inventory investment is very small. But in the macro model, the most important component is that whenever the market is down, when the market is fast, sometimes it is boom, sometimes it is recession, sometimes it is demand, the business is dry, the first component effect in both these cases is the component of the inventories. And you have to remember that inventories are either intentionally held, the firm wants to keep stock from itself and sometimes it is unintended. It is unintended in such a way that the product's firm wants to sell it, but during that year, they will not sell it, they will call it an unintended inventory accumulation. Now the investment will also have its determinants. So as the consumption's determinant is income or disposable income, the main determinant of the investment is the real interest rate. Why? Because the real interest rate is the cost of the funds which is required to run businesses, to invest in them. So either they borrow the funds from the banks, so banks charge interest on them, or if the business has its own savings and it is not borrowing from the banks, then we take it to the cost through opportunity cost. And I have already defined opportunity cost in a lecture. In this context, opportunity cost is that if the businesses do not utilize their funds in their investment and deposit them in the bank, for example in the long term deposit, or invest it in the treasury bills, or invest it in the stock market, then since they can take the return, then if they utilize their funds in their business, then it is also an opportunity cost. And that opportunity cost is also measured with the real interest rate. This means that the real interest rate is the major determinant of the investment. Whereas the second determinant is business expectations. That is, if the expectations of businesses are that in the future, the situation will not be good for the business, then they will not increase the investment. And if they know or their expectations are that in the future, the situation in our country, our economy will be very good, then they will prepare it, how they will prepare it, they will increase the investment, there can be two ways to increase the investment, new plants can be planted, or they can accumulate the inventory, so that when the demand increases in the future, then their demand can be fulfilled with that inventory. So the expectations of the business can be optimistic, it can be pessimistic. But what you have to remember is that it is not related to the interest rate, business expectations. This means that we have divided the investment into two parts. The first part of it, which is autonomous, means that it is not sensitive to the interest rate. Whereas the second part is that the interest rate is dependent, the interest rate is induced. When we combine these two, then your investment function will be formed. How do we write the investment function? We can write I, which is investment, is equal to I naught, which is autonomous investment expenditure, plus D into R I, D is just a coefficient which measure the sensitivity of investment with respect to interest rate. But R I is the real interest rate, which is applicable on debt or borrowing of a particular firm. Now this R I, because it has a risk, we can say that we can also decompose this R I in two components. That is, R I R plus F is equal to R can be the return of any safe asset, like the Treasury Bill. It is in the nominal form, you can convert it to the real form. And F means financial frictions. Financial frictions means, here I will explain that there is a lack of information that on one side there are savers who have to pay the loans, and on the other side there are borrowers who have to borrow and invest. Now there is a lack of information between these two, whether they will repay the loan or not. Whether they will return the loan or not. This means that because of the lack of information, there is a problem in paying the loan. Because there is a problem in paying the loan, there is a problem in investing. That is why we call it financial friction. When we substitute this R plus financial friction F in our actual investment function, our investment function in the final form will be I naught minus D into R plus F. This means that the return on safe assets affects the sense of opportunity cost or the sense of investment in a benchmark. And financial friction becomes a obstacle in the way of the loan, that is why it can affect the process of investment. After this, the last component aggregate demand is called net exports. And net exports means exports minus imports. The net exports can depend on many factors. But we have to look at the main determinant for our macroeconomic model. So, what is the main determinant? Again, we will divide net exports into two parts. An autonomous net exports and one second which depends on a variable. The part which depends on a variable depends on the interest rate. Now, the question is why net exports depend on the interest rate? Investments depend on the net exports. So, the net exports depend on a variable so that when the interest rates are high The interest rates start to rise from the other countries, which is why you start to see the value of your currency. And the amount of the currency increases, that means your net exports are decreasing. That is the reason why the interest rate is a role in net exports. And the second factor are So, autonomous expenditure as such, it does not depend on anyone, that dependence especially is not there in our function and that is the interest rate. So, autonomous net exports are not dependent on the interest rate, thank you.