Question

What is meant by investment? Discuss the two types of investments.

Answer 1

Investment refers to the total expenditure made by the producer sector in the production of output in the economy. The two type of investments are

• Ex-ante investment refers to the desired investment or planned investment during the period of one year. This is the investment expenditure which is intended to be made in the economy during the period of one year.
  
• Ex-post investment refers to the actual investment in the economy during the period of one year. This aspect of investment is considered in the calculation of National Income.