Investment Spending in Macroeconomics

What is an example of investment spending in macroeconomics?

A. The manager of a Domino's Pizza store has deposited cash in the bank.

B. The owner of a Domino's Pizza store has employed two students to deliver pizzas.

C. The owner of the Domino's Pizza store has bought stock in Domino's.

D. A Domino's Pizza store has purchased a new pizza oven.

Answer:

An example of investment spending in macroeconomics is a business purchasing physical assets, such as a Domino's Pizza store buying a new pizza oven.

The statement that is an example of investment spending in macroeconomics is: A Domino's Pizza store has purchased a new pizza oven. This type of spending falls under the category of investment expenditure, which involves the purchase of physical plants and equipment by businesses. This is distinctly different from the other activities mentioned since depositing cash in the bank, employing students for delivery, or buying stock, are not about acquiring or upgrading physical assets that are used to produce goods or services.

Investment expenditure is a vital component of Gross Domestic Product (GDP), albeit a smaller segment than consumption demand. It usually accounts for about 15-18% of GDP and is highly significant for the economy as it contributes to job creation. Investments such as buying new machinery, constructing new facilities, or embarking on research and development are crucial for the growth and productivity of a firm.