Investment Theories and Applications

Choose a study mode

Play Quiz
Study Flashcards
Spaced Repetition
Chat to Lesson

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What is the definition of real investment?

  • The purchase of new capital to produce goods and services (correct)
  • A form of financial savings
  • The shrinking of the economy's stock of capital
  • The purchase of existing shares and bonds

What distinguishes financial investment from real investment?

  • It decreases the stock of capital
  • It involves the change of ownership of existing assets (correct)
  • It measures the total amount incurred on new capital goods
  • It involves the creation of new capital goods

How is net investment calculated?

  • Gross investment - depreciation (correct)
  • Depreciation - gross investment
  • Depreciation + gross investment
  • Gross investment + depreciation

What happens when depreciation exceeds gross investment?

<p>The economy's stock of capital is shrinking (D)</p> Signup and view all the answers

Which of the following is a correct statement about investment?

<p>Investment increases the stock of capital (B)</p> Signup and view all the answers

What does gross investment refer to?

<p>The total amount incurred on the acquisition of new capital goods (A)</p> Signup and view all the answers

Flashcards are hidden until you start studying

Study Notes

Investment in Economics

  • Investment refers to the purchase of new capital used to produce goods and services, resulting in an increase in the physical stock of capital.

Types of Investment

  • Real investment: involves the addition of new capital, leading to an increase in production, employment, income, and buying of capital goods.
  • Financial investment: involves the buying of existing shares and bonds, which is a form of savings and only a change of ownership of assets, not the creation of new capital assets.

Investment and Capital Stock

  • Investment increases the stock of capital, unlike depreciation which decreases it.

Measures of Investment

  • Gross investment: the total amount incurred on the acquisition of new capital goods.
  • Net investment: the difference between gross investment and depreciation (net investment = gross investment - depreciation).

Impact of Investment on Economy

  • If depreciation exceeds gross investment, the economy's stock of capital is shrinking.

Studying That Suits You

Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

Quiz Team

More Like This

Use Quizgecko on...
Browser
Open
Browser
Browser