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The Complete Idiot's Guide to Economics, 2nd Edition by Tom Gorman

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The Importance of Investment

Up to now, I have discussed consumers and households, consumer demand, savings by households, and so on. I’ve focused heavily on the C—consumption—in C + I + G. Now, however, we must shift the focus to investment—the I in our GDP formula—in order to understand more fully how the economy really works.
You’ll recall that consumption represents about two thirds of GDP—that’s a significant portion of the economy. However, in a very real sense, investment determines economic growth, particularly long-term economic growth. Keep in mind that economists define investment as investment in productive capacity by businesses. This includes building and expanding factories and offices and purchases of equipment and vehicles. ...

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