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Gross and Net Investment


An import distinction to make is between gross and net capital investment spending.  Net investment is positive when gross investment is higher than depreciation or capital consumption, then there will be an increase in the nation's stock of capital.  Fixed Investment is spending on new capital machinery and plant, construction, housing, vehicles, etc.


Working Capital is spending on stocks/inventories of finished goods and raw materials. The accumulation of stocks by firms, whether voluntary or involuntary, is counted as investment.


Gross Domestic Fixed Capital Formation (GDFCF) is expenditure on fixed assets (buildings, vehicles and plant) either for replacing or adding to the stock of fixed assets.



E-mail Steve Margetts