Thank you for visiting Let s consider an economy in which Firms spend 125 on machinery used in production Home buying totals 120 People buy 20 in stocks and. This page is designed to guide you through key points and clear explanations related to the topic at hand. We aim to make your learning experience smooth, insightful, and informative. Dive in and discover the answers you're looking for!
Answer :
The economic investment in this economy is $175.
To calculate economic investment, we need to consider the components of investment in an economy. Economic investment includes both fixed investment and inventory investment.
Fixed investment refers to the purchase of long-term assets, such as machinery and equipment, which are used in production. In this case, firms spend $125 on machinery used in production. This $125 represents fixed investment.
Inventory investment, on the other hand, refers to the change in the value of inventories held by businesses. If businesses increase their inventories, it implies they are investing in additional inventory stock. In this case, businesses add $50 to their inventories, which represents inventory investment.
Therefore, the economic investment in this economy can be calculated by summing up fixed investment and inventory investment:
Economic Investment = Fixed Investment + Inventory Investment
= $125 + $50
= $175
So, the economic investment in this economy is $175. This represents the total amount of investment made by businesses, including the purchase of machinery and the addition to inventories. It indicates the level of investment activity and can have an impact on economic growth and productivity.
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