Question

Define the term ‘investment’.

Answer 1

Investment is the process of putting surplus funds in some productive activity with the expectation of a reasonable return and the assurance of the capital remaining intact.

Answer 2

Investment refers to the expenditure incurred on the purchase of new plants, capital equipment, machinery, new buildings and additions to business inventories. It is essentially the part of income used for real capital formation that leads to an increase in productive capacity. According to Keynes, investment includes the increment of capital equipment.