Definition of Investment (Part 2)

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Definition of Investment (Part 2)

Many experts who have formulated the definition of investment. The term investments related to various investment activities or saving a certain goal-oriented and how to achieve that goal (EP Pratomo: 2008, 7). According to AH Manurung (2006: xvii) defines investment as consumption temporarily postponed and will be consumed more in the future. That is, one party, both individuals and institutions will postpone their consumption with the purchase of investment instruments and then sell the investment instruments in the hope that the additional or greater value than ever.

The definition of investment by Eduardus (2001, 3) is the commitment of a number of funds or other resources committed at this time, with the aim of obtaining a profit in the future. While the definition of investment according to Ahmad (1996, 3) is the placement of funds or money in the hope to obtain benefits or certain additional advantages over the money or funds. That is, some invested money or invested in certain areas that are considered investors can get results.

Investment (in wikipedia.org) based on economic theory, means the purchase (and thus production) of capital / capital goods which are not consumed but are used for the upcoming production (production goods). Examples among other investments to build toll roads, or build a factory, clearing new land, or someone who went to college education, and so forth.

For more details, investment is also a component of Gross Domestic Product by formula GDP = C + I + G + (XM). The investment function in that aspect is divided in non-residential investment (such as factories, machinery, etc.) and residential investment (new houses). Investment is a function of income and interest rates, given by the relation I = (Y, i). An increase in income will encourage greater investment, where higher interest rates will lower the interest for investment as it becomes more expensive than borrowing money. Even if a company chooses to use its own funds for investment, the interest rate indicates an opportunity cost of investing those funds rather than lend to earn interest.

Healthy | Smart | Rich, at: 2/16/2012