Question

Explain the types of investment expenditure.

Answer 1

Types of Investment expenditure:
Investment expenditure can be broadly classified into the following types:

1. Autonomous investment expenditure is the one that does not depend on the current production or the demand for goods. This expenditure is not made with the profit motive. The government constructs roads, bridges and canals etc. which are regarded as the infrastructure for the country's economic development. Induced investment depends upon the current level of production and demand for the product.
   
   
2. Financial investment refers to the investment expenditure made on the purchase of shares, bonds, securities etc.
   
   
3. Real investment refers to the investment expenditure made on the purchase and production of new capital goods like machinery, roads, bridges, power projects etc. Such investment increases the productive capacity of the country.
   
   
4. Gross investment refers to the entire expenditure incurred on acquiring new capital assets like machinery.
   
   
5. Net investment expenditure is calculated by deducting the depreciation charges from the value of existing capital assets.
   It can be calculated as: N.I. = G.I. - Depreciation