Macroeconomics (Fourth Edition)
4th Edition
ISBN: 9780393603767
Author: Charles I. Jones
Publisher: W. W. Norton & Company
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Question
Chapter 17, Problem 1RQ
To determine
Physical investment and physical capital against financial investment and financial capital.
Expert Solution & Answer
Explanation of Solution
Physical investment refers to the acquisition of capital goods. Capital goods, such as equipment, structures, and software, are used for the production of other goods. Physical capital refers to the labor force or man-made products used for the manufacturing process. Financial investment refers to the acquisition of financial assets such as equity, bond, shares, and so forth. Financial assets represent a store of wealth that connects present income flows to future consumption.
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Students have asked these similar questions
What is the difference between financial investment and economic investment?
1)
There is no difference between the two.
2)
Financial investment refers to the purchase of financial assets only; economic investment refers to the purchase of any new or used capital goods.
3)
Economic investment is adjusted for inflation; financial investment is not.
4)
Financial investment refers to the purchase of assets for financial gain; economic investment refers to the purchase of newly created capital goods.
Explain three types of capital receipts in an given economy?
Explain Three ways that a reduced rate of interest influences real capital investment.
Chapter 17 Solutions
Macroeconomics (Fourth Edition)
Knowledge Booster
Similar questions
- Distinguish between saving and investment.arrow_forwardThe following graph shows the market for loanable funds in a closed economy. The upward-sloping orange line represents the supply of loanable funds, and the downward-sloping blue line represents the demand for loanable funds.arrow_forwardSuppose the government is considering an increase in the retirement age for Australian citizens. Using the diagram for the market for loanable funds, explain how this change would affect the equilibrium real interest rate and investment. In the long run, how would this change affect real GDP in Australia?arrow_forward
- Define the concept of rate of return on investment?arrow_forwardWhat are the contributing factors that contribute to the successful investment companies in the investment market.arrow_forwardWhy is there a trade-off between the amount of consumption that people can enjoy today and the amount of consumption that they can enjoy in the future? Why can’t people enjoy more of both? How does saving relate to investment and thus to economic growth? What role do banks and other fifinancial institutions play in aiding the growth process?arrow_forward
- What is Capital expenditure?arrow_forwardThere are over 30 million firms in the U.S., of which about 5.8 million are corporations. A mere 35,000 of these corporations have annual sales of over $50 million, and this relative handful of corporations, commonly thought of as “big business”, account for over 80% of total corporate profits in this country. Are those millions of other corporations, sole proprietorships, and partnerships outside of big business fairly insignificant to the U.S. economy then? If not, then what is the importance of these smaller companies to the national economy?arrow_forwardWhat do loanable funds finance? What is the source of loanable funds? Loanable funds finance _______. A. business investment, the government budget surplus, and international borrowing B. business investment, the government budget deficit, and international investment or lending C. private saving, the government budget surplus, and international borrowing D. private saving, the government budget deficit, and international investment or lendingarrow_forward
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