The meaning of investment in the Keynesian sense is different from its ordinary sense. Ordinarily investment means the purchase of stocks and shares, Govt, bonds, equities etc. But there are financial investments. Keynes means investment as the real investment.
According to Stonier and huge, “By investment, we do not mean the purchase of existing paper securities, bonds debentures, or equities but the purchase of new factories, machines and the like. In the case of financial’ investment no new physical- asset to be used for production is created.
Spending on these cannot be called real investment. In economics expenditure on the creation of new physical assets or capital goods such “as factories, machines, tools, houses etc. is called investment expenditure. There expenditure leads to the creation of new physical assets that add to the aggregate demand for goods and services.
Types of Investment:-
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(1) Induced investment and Autonomous investment:
Induced investment is that investment which changes with the change in income of the rate of profit. It increases with as income increases and decreases as income decreases. Thus-induced investment is income elastic. In capitalistic economy investments are mainly induced investment. Induced investment is also called private investment because private individuals and motivated by the profit expectations.
The induced investment curve slopes upward to might showing increase in investment as a result of increase in income. Autonomous investment, on the other hand, is independent of income and is not guided by profit motive. This investment is generally undertakes by the Govt, who is not guided by the profit consideration. The autonomous investment curve is a horizontal straight line parallel to the OX-axis. It indicates that the investment remains the same what ever the level of income may be.
(2) Gross Investment and Net Investment:
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Gross investment means the total expenditure on capital goods in a given period of time. Gross investment comprises of (a) net investment (b) depreciation. Net investment means the vestment which results in an increase in capital stock. Net vestment is the excess of gross investment over depreciation.
(3) Planned and unplanned Investments:
The Investment is said to be planned or intended where investments made intentionally to achieve certain desired goal. When investment on goods is made in expectation of a rise in prices, the investment is called planned or intended. On other hand on account of sudden fall in demand stocks of finished and unfinished goods accumulated with the businessmen, it is called an intended or unplanned investment.