KINDS OF INVESTMENT

by • 02/07/2011 • B.COM PART 1 EconomicsComments (0)940

Investment is the theory of income and employment, means an addition to the nation’s physical stock of capital like the building of new factors, new machines as well as any addition to the stock of finished goods or the goods in the pipeline of production. Investment includes addition to inventories as well as to fixed capital.

KINDS OF INVESTMENT

Financial Investment:

It is expenditure on the purchase of financial securities such as stock and shares. Portfolio investment is undertaken by persons, firms and financial institution in the expectation of earning a return in the form of interest of dividends, or an appreciation in the capital value of the securities

Real Investment:

Capital expenditure on the purchase of physical assets such as plant, machinery and equipment, is called real investment. In economic analysis, the term investment related specifically to physical investment. Physical investment creates new assts thereby adding to the country’s productive capacity.

Autonomous Investment:

Investment which is independent of the level of income is called autonomous investment. Such investment does not vary with the level of income. In other words, it is income-in-elastic.

National Income Y (Million Rs.)

Investment I, (Million Rs.)

50

20

100

20

150

20

200

20

Induced Investment:

Investment which varies with the changes in national income is called induced investment. Changes in national income bring about changes in aggregate demand which in turn affects the volume of investment.

National Income Y (Million Rs.)

Investment I, (Million Rs.)

100

10

150

15

200

20

250

25

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