When firms purchase new capital we call this <u>Business fixed investment</u>.
Business Fixed investment is the purchase of new capital goods by firms which include building, installations, vehicles, technology, etc. Firms buy capital goods to improve or increase future productions which can be very vital to the growth of the firm.
<h2>Further Explanation</h2>
Capital goods are also classified as tangible assets and are also referred to as intermediate goods or economic capital.
Generally, investment is when a person spends some money to expand or start a new project or to acquire assets to create incomes and increase value over time.
Investment can be used to describe any mechanisms that are put in place to generate income which could include the purchase of bonds, real estate property, and many others. Machines, buildings and other facilities important in the process of production are also classified as an investment.
The productions of goods and services that others can purchase to produce goods and services may also be categorized as an investment.
Firms purchase new capital goods (factories, office building) to grow or expand their businesses, which in turn increases production and brings more profit.
Therefore, when firms purchase new capital we call this Business fixed investment.
LEARN MORE:
KEYWORDS:
- new capital
- capital goods
- firms
- office building
- machinery
