Investments – cash, securities, other property, including property rights, other rights having a monetary value, invested in objects of entrepreneurial and (or) other activities in order to make a profit and (or) achieve another beneficial effect. K. R. McConnell and S. L. Brew in their book Economics defined investments as the costs of manufacturing and accumulating means of production, as well as the increase in inventories .
Investment activity is the investment and implementation of practical actions in order to make a profit and (or) achieve another beneficial effect.
From the position of the monetary theory of money, funds can be directed to consumption or savings. Simple saving withdraws funds from circulation and creates prerequisites for crises. Investing brings savings into circulation. It can occur directly or indirectly (placement of temporarily free funds on a deposit in a bank that is already investing itself).
Investment multiplier[edit | edit code]
Main article: Keynes multiplier
Investments in the national economy lead to a total increase in GDP by an amount that significantly exceeds the amount of investment. Keynes believed that the amount of initial investment would give a corresponding increase in GDP. But the people who received this money will direct part of it to consumption (which will generate additional GDP growth), and part will go to savings (they will not be exchanged for goods, effective demand will decrease by this amount). In the future, funds directed to consumption will again be divided into new consumption (making a new contribution to GDP, albeit for an ever smaller amount) and new accumulation. The following diagram illustrates this. Let the investment create additional demand that generates 100 jobs. Those who have been employed will spend part of their income on consumption, which will provide employment for 80 workers. These workers, in turn, will use part of the income for consumption, which will create 64 jobs. And so on, until the initial investment is completely absorbed by the savings. Therefore, a one-time investment forms the total GDP for many periods as the sum of a decreasing geometric progression
An accelerator is the ratio of an increase in investment to the relative increase in income, consumer demand, and finished goods that caused it. The accelerator reflects the ratio of production growth only to induced investments, that is, to new capital.
Classification of investments[edit | edit code]
There are different classifications of investments.
According to the object of investment, allocate
Real investments (direct purchase of real capital in various forms):
in the form of tangible assets (fixed assets, land), payment for construction or reconstruction;
overhaul of fixed assets;
investments in intangible assets: patents, licenses, rights of use, copyrights, trademarks, know-how, etc.;
investments in human capital (upbringing, education, science);
acquisition of a ready-made business.
Financial investments (indirect purchase of capital through financial assets):
securities, including through mutual funds;
leasing (for the lessor).
Speculative investments (buying assets solely for the sake of a possible price change):
precious and rare earth metals (in the form of unallocated metal accounts);
securities (shares, bonds, certificates of joint investment institutions, etc.).
According to the main investment objectives
Intellectual investments (associated with the training of specialists, conducting courses and much more).
By investment period
short-term (up to one year);
medium-term (1-3 years);
long-term (over 3-5 years).
By form of ownership of investment resources
According to the method of reproduction
gross investments – the total amount of funds invested in new construction, the acquisition of means and objects of labor, the increase in inventory and intellectual values;
renovation investments (renovation investments) – investments in the simple reproduction of fixed assets and depreciable intangible assets (usually in the amount of depreciation deductions).
net investment – the sum of gross investments minus depreciation charges.
According to the factors that determine the volume of demand for investment:
– autonomous, that is, those investments that are not caused by an increase in aggregate demand (that is, national income), but are the result of innovations, scientifically