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.