A simple thread to understand the meaning of investment cycle (Gross Fixed Capital Formation) in the economy and why it is important?
Which sectors can benefit in such cycle and why?

Do share if you find it useful.

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What is Gross Fixed Capital Formation?

There are essentially 2 methods to calculate GDP of a country. Both methods ultimately tries to measure the total value of goods and services produced in the country during a particular period.

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1. Income Method of GDP calculation adds up INCOME EARNED from all goods and services produced in the country.

2. Expenditure method of GDP calculation takes into account all purchases of goods and services in the country.

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Expenditure method adds up all
consumer spending(C), government spending (G),
business investment spending (I), and net exports (x-m)

Formula:
GDP = C + I + G + (X − M) is the formula for EXPENDITURE method of GDP.

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The “I” (investment) component in the above includes, business investments in creating new assets and spending by households (not government) on new houses also gets included in Investment.

This is known as "Gross Fixed Capital Formation"

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