Question:
Which of the following is the best example of investment as defined by economists?
(i) A restaurant owner buys a freezer to store ingredients for the restaurant meals.
(ii) A college professor buys a truck to drive around in.
(iii) A business manager purchases stock on the New York Stock Exchange.
(iv) A worker deposits money into a long-term retirement account.
Investment Expenditure:
Investment Expenditure is the sum of two components -
(i) nonresidential investment, the purchase by firms of new plants or new machines (from turbines to computers), and
(ii)residential investment, the purchase by people of new houses or apartments.
Firms buy machines or plants to produce output in the future. People buy houses or apartments to get housing services in the future.
Answer and Explanation:1
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Economists use ?investment? to refer to the purchase of new capital goods, such as (new) machines, (new) buildings, or (new) houses. Therefore, the...
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