Investment spending refers to expenditures made by businesses and individuals on capital goods such as machinery, equipment, and buildings. It is one of the components of aggregate demand and contributes to economic growth.
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Capital Goods: Capital goods are physical assets used by businesses to produce other goods or services. Examples include factories, vehicles, and technology.
Gross Domestic Product (GDP): GDP measures the total value of all final goods and services produced within a country's borders during a specific period. Investment spending is one component used to calculate GDP.
Business Cycle: The business cycle refers to fluctuations in economic activity characterized by periods of expansion (growth) and contraction (recession). Investment spending tends to be influenced by changes in the business cycle.