INVESTMENT
Investment or capital formation refers to addition to the capital stock of an economy. For example-Construction of roads, flyovers, Building, etc.
Investment can be of two forms:
- Gross Investment
- Definition: It is an addition to the stock of capital before making allowance for depreciation
- Net Investment
- Definition: Net Investment is an actual addition made to the capital stock of the economy in a given period.
Net Investment = Gross Investment- Depreciation
EX-ANTE & EX-POST SAVING AND INVESTMENT
Definition: Ex-ante means planned or expected value of the variable, whereas Ex-post means an actual or realized value of the variable.
Both are generally used in the context of saving and investment. There are two aspects of Savings and Investments:
- Ex Ante saving and Ex Ante investments
- Ex-post saving and Ex post investments
Ex-Ante Savings
Refers to the amount, which households are planning to save at different level of income in the economy.
Ex-Ante Investments
It refers to the amount of investment, which firms plan to invest at a different level of income in the economy.
EX-POST SAVINGS
Ex-post saving refers to actually organized saving in an economy during the year.
EX-POST INVESTMENTS
It refers to actual or realized investment in an economy during a year.