Jim buys a $1000 bond from ABC Company.ABC Company uses the $1000 to purchase a new piece of machinery.Whose spending would be an act of investment in the language of macroeconomics?
A)only Jim's
B)only ABC Corporation's
C)Jim's and ABC Corporation's
D)neither Jim's nor ABC Corporation's

Question

Quizplus · Accepted Answer

In macroeconomics, investment refers to the purchase of physical capital goods such as machinery, equipment, and buildings. In this scenario, ABC Corporation's purchase of the new piece of machinery is an act of investment since it involves the acquisition of a physical capital good that can be used to produce goods and services in the future. Jim's purchase of the bond does not meet the criteria for an act of investment in macroeconomics since it does not involve the acquisition of a physical capital asset.

Jim Buys a $1000 Bond from ABC Company