Economics Made Economical

Vocab of the Day: Investment

Investment is one component of GDP, along with personal consumption, government spending, and net exports. In marcoeconomic theory, the word typically has a very different meaning than it does in everyday language, as is the case when we’re looking at Investment as a component of GDP.

The Investment category comprises goods that aren’t purchased for direct consumption, but rather as an “upgrade” or advancement that increases productivity. In various cases, Investment can cover everything from upgrading your business’s computer systems, purchasing or repairing mechanical items to be used in making your company more efficient, hiring better quality labor, or even loaning your money to a bank to be repaid with interest.

In all of these cases, money spent or earned on the investment (increased productivity, interest income, etc) are included in this category for GDP calculation.



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