What is meant by the term 'investment'? Exam question

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Sameerio
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With Reference to extract 3,line 5 "All those extra bullet trains failed to generate a period of growth in the economy's output".

How are trains considered an investment? I thought investment was when firms spend money on capital equipment e.g.factories , offices ,machinery and stocks of goods used in production process. Train doesn't fit into any of those.
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PrinceUpsb
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(Original post by Sameerio)
With Reference to extract 3,line 5 "All those extra bullet trains failed to generate a period of growth in the economy's output".

How are trains considered an investment? I thought investment was when firms spend money on capital equipment e.g.factories , offices ,machinery and stocks of goods used in production process. Train doesn't fit into any of those.
From the quote I guess they're talking about the government making an investment (if their goal is to generate growth in economy). Trains serve as an investment for the government b/c the idea is that they spend x money now and they generate greater economic growth later down the line (think multiplier) - this is due to improved access/ reduced cost of transport - quicker transport - making it easier for people to commute to work - or e.g. people with a home business may now find it more cost effective to set up a shop elsewhere and travel by train - all this supports expenditure in the economy.

Essentially govt expenditure on trains = encouraged demand for train travel which in turn encourages business activities/ consumption etc etc - so is an investment for the economy.
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fedorahat88
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Investment is the expenditure on capital goods like plants, machinery, and even arguably human capital.

Not only firms can invest, governments can invest by building capital goods or in infrastructure such as rail tracks or bullet trains.

Further add on:
These are a part of capital expenditure in the fiscal balance. You don't need to know this for Unit 2 but you need to know it for Unit 4.
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