What is Investment in national income class 12, definition, types, examples?

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Confused, What is Investment, its types and definition in National Income chapter of Macroeconomics class 12 CBSE, ISC and State Boards

In this lecture, I will discuss the concept of Investment as given in the National Income chapter of economics class 12 CBSE Board.

What we study here, is what is considered as an investment in economics.

Define Investment

Addition made to the stock of capital during a period is called investment.

Book, S.K Aggarwal

Example of Investment

Let’s assume capital at the beginning of the accounting year is ₹ 5000. During the year, the owner further invests ₹ 7000 in the business. Thus capital at the end of the accounting year is ₹ 12000.

In the above example. As per the economics, only ₹ 7000 is considered as the investment.

Thus, according to the definition of investment. Investment is just the addition to the present stock of capital during the year.

Difference between Capital and Investment

Capital vs Investment

The Capital Goods added to this capital during the year, is called investmentThe accumulated stock of Capital goods at the beginning of the year is called capital

Note:- Capital & Investment consist of Capital Goods

Types of Investment

Fixed and Stock Investment

Fixed Investment

Investment in fixed capital is called fixed investment i.e. machinery, furniture, etc.

Stock Investment

Investments in stock of raw materials, semi-finished goods, and finished goods stock investment. i.e. goods to be sold.

Examples of Investment

Investment is assumed to be made only by the producer, not by the consumer at all.

Examples of fixed investments are machinery, furniture, building, etc.

Examples of Stock investment are raw material, semi-finished goods, and finished goods.

What is Gross Investment

Gross investment is an addition to the stock of capital before making an allowance for depreciation.

What is Net Investment

The actual addition made to the capital stock of the economy in a given period is termed as Net Investment.

Net Investment = Gross Investment – Depreciation

Further Reading

1.What is Macroeconomics
2.What are Goods in economics
3.What are Consumption Goods
4.What are capital goods
5.What are intermediate Goods
6.What is intermediate consumption
7.What are final Goods
8.What is Final Consumption
9.What is investment in economics
10. What is stock and flow
11.What are transfer payments
12.What is circular flow of income
13.What is Domestic Territory of a Country
14.What is normal resident of a country
15.Nominal GDP and Real GDP
1.What is GDP Deflator
2.What are externalities in economics
3.Limitations of GDP as a measure of welfare
1.Items to be included in National income
2.Items to be included in Domestic Income
1.National Income and Related Aggregates, formula, Definition, process
2.Value added Method, formula, Definition, process
3.Income Method, formula, Definition, process
4.Expenditure Method, formula, Definition, process
1.150+ Numerical of Value Added Method
2.150+ Numerical of Income Method
3.150+ Numerical of Expenditure Method
4. 150+ Numerical of National Income and related aggregates
1.250+ MCQs of National Income
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Anurag Pathak

Anurag Pathak is an academic teacher. He has been teaching Accountancy and Economics for CBSE students for the last 18 years. In his guidance, thousands of students have secured good marks in their board exams and legacy is still going on. You can subscribe his youtube channel and can download the Android & ios app for free lectures.

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