5 Questions
What is the primary goal of investing in the financial sense?
To allocate monetary resources to assets that are expected to yield some gain or positive return
What is included in the economist's definition of investment?
Inventories and human capital
What is the difference between investment in the financial sense and the economic sense?
The financial sense is focused on monetary resources, while the economic sense is focused on capital stock
What type of investments are referred to as 'Financial Investments'
Allocations of monetary resources to assets expected to yield some gain
What is the primary focus of investment in the economic sense?
Increasing the economy's capital stock
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
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.
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