Investment is the amount of money spent after obtaining it from financial firms such as banks. This money that is raised can be spent on investments such as buying assets (machinery, factories), buying more inventory for busier periods of trading (Christmas for retailers) and even a new marketing campaign.
Government Expenditure (G)
The spending of governments is classed as an injection. This is because they have accumulated money partly through taxes (which we know are withdrawals) and are now injecting is back into the flow of income. They inject it through spending on things such as emergency services, hospitals, schools, libraries and maintenance. Just like taxes, government expenditure is widely debated in politics as people have different priorities. It is the government’s responsibility to try and accommodate all of those needs as best as possible.
Export Expenditure (X)
This is where money comes into one country’s economy after flowing out of another. For example, Person 1 in the UK purchases a product or service from Person 2 in China. China’s exports have increased as a result of this transaction as they are the ones receiving the money and sending their product or service.