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What is Real Investment?

Investment
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What is Real Investment?

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Real investment or physical capital investment is the component of aggregate demand that refers to the decisions by firms to purchase equipment and physical plant, and also the purchases of new homes by consumers. The amount of real investment is critical to economic growth. Financial investment and real investment are connected, but they are not the same. Thus, when you hear a casual reference to “investment,” be clear in your own mind on whether it is financial investment or real investment.

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