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Financial Investments and Economy

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Questions and Answers

What is the primary goal of investing in the financial sense?

To form new and productive capital in the form of new construction

To increase the economy's capital stock

To improve human capital

To allocate monetary resources to assets that are expected to yield some gain or positive return (correct)

What is included in the economist's definition of investment?

Only new construction and plant equipment

Only producers' durable equipment

Only goods and services used in production

Inventories and human capital (correct)

What is the difference between investment in the financial sense and the economic sense?

The financial sense is more risky than the economic sense

The economic sense is more focused on forming new capital

The financial sense is more focused on short-term gains

The financial sense is focused on monetary resources, while the economic sense is focused on capital stock (correct)

What type of investments are referred to as 'Financial Investments'

<p>Allocations of monetary resources to assets expected to yield some gain (D)</p> Signup and view all the answers

What is the primary focus of investment in the economic sense?

<p>Increasing the economy's capital stock (D)</p> Signup and view all the answers

Study Notes

Investment in Financial Sense

Investment is the allocation of monetary resources to assets that are expected to yield some gain or positive return over a given period
Assets can range from safe investments to risky investments
Also referred to as ‘Financial Investments’

Investment in Economic Sense

In economics, investment means the net additions to the economy’s capital stock
Capital stock consists of goods and services used in the production of other goods and services
Includes the formation of new and productive capital in the form of:
- New construction
- New producers’ durable equipment (e.g. plant and equipment)
Inventories and human capital are also included in the economist’s definition of investment

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Description

Learn about financial investments and how they differ from economic investments. Understand the concept of investments in finance and economics, including the types of assets and capital stock.