what is the significance or importance of fixed investment? acc. to 4 marks
atleast 6-7pts.with explanations.
Fixed investment refers to the investment done or the expenditure incurred by the producers on fixed factors or fixed assets such as land, building, machinery, etc. The following points highlight the importance of fixed investment in a country.
i. It is considered as one of the important indicators of long term growth and development of a country. This is because fixed investment is an essentially component of the total aggregate demand.
ii. It is a vital indicator of the productivity of the country. This is because greater machines implies higher productivity and efficiency.
iii. Fixed investment also measures the amount of increase in the total stock of capital each year. Higher fixed investment implies a higher total stock of capital and output.
iv. It plays a vital role in the cyclical movements in incomes as it initiates and supports the whole process of income creation.
v. Fixed investment is an important indicator of a country's per capita GDP growth and income levels of a country.