Investment is the amount of goods purchased or accumulated per unit time which are not consumed at the present time. The types of investment are residential investment in housing that will provide a flow of housing services over an extended time, non-residential fixed investment in things such as new machinery or factories, human capital investment in workforce education, and inventory investment (the accumulation, intentional or unintentional, of goods inventories ).
Buffett has advised in numerous articles and interviews that a good investment strategy is long-term and due diligence is the key to investing in the right assets. Edward O. Thorp was a highly successful hedge fund manager in the 1970s and 1980s who spoke of a similar approach.
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Macroeconomics is a branch of economics dealing with the performance, structure, behavior, and decision-making of an economy as a whole. For example, using interest rates, taxes and government spending to regulate an economy’s growth and stability. This includes regional, national, and global economies. Macroeconomists study topics such as GDP, unemployment rates, national income, price indices, output, consumption, unemployment, inflation, saving, investment, energy, international trade ...
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Economists assess the success of an economy’s overall performance by studying how it could achieve high rates of output and consumption growth. For the purpose of such an assessment, three macroeconomic variables are particularly important: gross domestic product (GDP), the unemployment rate, and the inflation rate. Gross Domestic Product The GDP equals the total value of goods and services produced in a country during a year. Economic growth is, therefore, a sustainable increase in the amount of goods and services produced in an economy over time. However, economic growth is different from economic development. Noneconomists usually make little or no distinction between the two terms, using them interchangeably. Going further than GDP growth, economic development can be defined as “a multi-dimensional process of change focused on the betterment of the community, state, and/or country … and aimed at producing more ‘life sustaining’ necessities such as food, shelter, and health care...
Until the 1930s, most economic analysis did not separate microeconomic behavior from macroeconomic behavior. The 1776 publication of The Wealth of Nations by the Scottish economist Adam Smith (1723–1790) marked the birth of classical economics. Along with Smith, the major representatives of this school of economic thought include David Ricardo (1772–1823), Thomas Robert Malthus (1766–1834), and John Stuart Mill (1806–1873). Classical economists emphasized the optimization of private economic agents, the adjustment of relative prices to equate supply and demand, and the efficiency of free markets. The classical theory dominated economic analysis till the late 1920s. Its main presumption is that the economy works better when government intervention is kept at a minimum because the behavior of different economic agents tends to achieve self-interests that are consistent with the overall well-being of the economy. Classical economists believed that the market itself would correct for an...
Like all scientists, economists rely on both theory and observation. Macroeconomists usually try to explain the economic world as it is and consider what it could be. For this purpose, they use many types of data to measure the performance of an economy. They collect data on incomes, prices, unemployment, and many other economic variables from different periods and different countries. They then attempt to formulate theories that could help explain these data. They try to answer such questions as: Why do incomes increase over time? Why do some countries have high rates of inflation while others maintain stable prices? What causes recessions and how can economic policy be used to reduce their incidence and scale? The goal of studying macroeconomics, however, is not just to explain economic events but also to improve economic policy. Macroeconomic policies are government actions designed to influence the performance of the economy as a whole. By understanding how government policies a...
Different analytical approaches lead to different policy conclusions. For example, a Keynesian approach would have governments run a surplus during the boom period of business cycles and a deficit during a recession. On the other hand, classical economists would prefer that the government not intervene to correct for short-term economic fluctuations; they believe this will distort the way free markets function. Others argue that using taxation as a macroeconomic policy tool has no effect on the economy; rational individuals tend to save when they receive tax cuts because they expect the government to raise taxes in the future to pay off its deficit. As articulated in Mankiw (2004), there are three unresolved questions pertaining to monetary and fiscal policies, each of which is central to political debates: First, should policymakers try to stabilize the economy? Second, should monetary policy be made by rule rather than by discretion? Third, should the government balance its budget...
Baumol, William J., and Alan S. Blinder. 2006. Macroeconomics: Principles and Policy. 10th ed. Mason, OH: Thomson SouthWestern. Colander, David C. 2006. Macroeconomics. 6th ed. Boston: McGraw-Hill/Irwin. DeLong, J. Bradford, and Martha L. Olney. 2006. Macroeconomics. 2nd ed. New York: McGraw-Hill/Irwin. Dornbusch, Rudiger, Stanley Fischer, and Richard Startz. 2004. Macroeconomics. 9th ed. New York: McGraw-Hill/Irwin. Frank, Robert H., and Ben S. Bernanke. 2004. Principles of Macroeconomics. 2nd ed. New York: McGraw Hill/Irwin. Hall, Robert E., and Marc Lieberman. 2006. Macroeconomics: Principles and Applications. 3rd ed. Mason, OH: Thomson South-Western. Keynes, John M. 1936. The General Theory of Employment, Interest, and Money. Cambridge, U.K.: Cambridge UniversityPress. Mankiw, N. Gregory. 2003. Macroeconomics. 5th ed. New York: Worth. Mankiw, N. Gregory. 2004. Principles of Macroeconomics. 3rd ed. Mason, OH: Thomson South-Western. McEachern, William A. 2006. Macroeconomics: A Co...
Capital formation is a concept used in macroeconomics, national accounts and financial economics. Occasionally it is also used in corporate accounts. It can be defined in three ways: It is a specific statistical concept, also known as net investment, used in national accounts statistics, econometrics and macroeconomics.
Investment, process of exchanging income during one period of time for an asset that is expected to produce earnings in future periods. Thus, consumption in the current period is foregone in order to obtain a greater return in the future. Read More on This Topic art market: Art as investment
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