Investment sales and the interest rate e In our first model of output determination, investment was left unexplained--we assumed it was constant even when output changed Investment is in fact far from constant, and it depends primarily on two factors ● The level of sales ● The interest rate To capture these two effects we write the investment relation as follows =(XY,) 5.1 Equation(5. 1)states that investment depends on production, Y, and the interest rate, iInvestment, Sales, and the interest rate In our first model of output determination, investment was left unexplained—we assumed it was constant, even when output changed. Investment is in fact far from constant, and it depends primarily on two factors: ●The level of sales ●The interest rate To capture these two effects, we write the investment relation as follows: I=I(Y,i) (5.1) (+,-) Equation (5.1) states that investment depends on production, Y, and the interest rate,i