What is Investment?

Question

Define the Investment? Or, How Many Components of Investment?

Answer 1

Investment is a process of capital formation, or a process that increase the Stock of Capital.

Producers always try to increase their capital stock, so that their capacity to produce increases over time, Increases in the stock of capital during the year is called Investment during the year.

Investment has two (2) Components :

(i) Fixed Investment, and 

(ii) Inventory Investment.