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Question
Explain various types of investment expenditure.
Solution
Meaning:- Investment refers to the use of saving for purpose of production made by an individual or a business firm. The aim of investment is to acquire capital goods or assets e.g. Machinery, plant, factory building, raw materials etc.
Types of Investment Expenditure:-
1. Gross Investment:- It is the total investment in fixed assets like buildings, machines and in inventories (stock) during a year without deducting capital depreciation or capital consumption.
2. Net Investment:- Net investment is the gross investment minus capital consumption during a year. Capital consumption include:
- Depreciation of capital assets.
- Losses to capital assets due to fire, earthquakes, etc.
3. Autonomous Investment:- These are investments made by the government for the welfare and benefit of the people. These investments are made without any profit motives. This type includes investments made by the government in roads, railways, bridges, dams, communication facilities health and education facilities, exploration of oil and natural gases, etc.
4. Induced Investment:- These are investments made by the private sector or private entrepreneurs mainly for profit motive; it is prominent in capitalistic and free market economics. Private sector investment is mostly induced investment.
5. Financial Investment:- It is the investment expenditure made for the purchase of shares, bonds, securities, stock, etc. in the country during the year. This investment is expressed in money term.
6. Real Investment:- It is the investment made for creating new stock of real/physical capital assets such as machines, factory, buildings, tools and equipment, etc. in the country during a year. This investment is expressed in real/physical terms.
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