DIFFERENT KIND OF INVESTMENT

According to Saluba (2018) Investment is the use of according to Saluba (2018),

savings to become future income. The term more banks lend some of those
specifically refers to the use of funds to acquire funds to business firms. The
capital goods. firms, in return, use these
bank loans to invest in new
Capital goods are physical assets that a company buildings and equipment to
uses in the production process to manufacture expand production. Many
products and services that consumers will later use. firms also raise funds for
e. Examples of capital goods includes factories, business expansion by issuing
offices, machinery and computers stocks and bonds that are
sold to investors,
Many people save or invest part of their current
income to consume it or gain more in the future.
Some do this indirectly by letting others invest their
funds, while others invest directly in their own
businesses. Investment is very important in economic

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development and growth.
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Different kinds of investment

Before investing to something, people should learn about how

the money they are investing will be used and assess what is
the expected return of their investment.

According to Barth and Ramesh L. (2001) There are two main

kinds of Investment:

1. Direct Investment:
a. Business Investment- buying a small business may be
the most demanding kind of investment. Investors may be
required to work hard to earn an acceptable return. For this
reason, the investor, must be sure to choose the right business
before making any commitment.
b. Real Estate- People invest in real estate when they buy

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homes, land, or rental properties. Real estate may increase in
value overtime thus be sold for a profit.
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2. Indirect Investments
a. Savings Account- is a common kind of investment.
Funds deposited in savings account at bank, credit
union or savings institutions earn interest at specified
annual rate. Most banks offer money market
accounts, certificates of deposits and other special
savings plan.
b. Bonds- this includes government securities and
corporate bonds. Government securities are issued
by the government. These investments pay interest at
a specified rate over a certain period. Savings bonds
issued by the government are popular among
investors because they are sold in small
denominations and are safe. Most savings bonds can
be redeemed in cash, if necessary, after six months,

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and pay interest rates reflecting rates paid on certain
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c. Stocks

A common stock represents

shares of ownership in a
company. The stockholders of
a firm share in its profit and in
losses, too, but only to extent
of their investments.

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STOCKS

A Preferred Stock is a type of

corporate security that has
features of both bonds and
common stock. Like common
stock, preferred stock promises
fixed rate of return. The
corporation must pay this return
before it distributes any dividends
to investors in common stock.

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Other Kinds of Indirect Investments

1. Mutual Funds- A mutual fund is a

type of financial vehicle made up of a
pool of money collected from many
investors to invest in securities like
stocks, bonds, money market
instruments, and other assets. Mutual
funds are operated by professional
money managers, who allocate the
fund's assets and attempt to produce
capital gains or income for the fund's
investors. A mutual fund's portfolio is
structured and maintained to match the

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investment objectives stated in its
prospectus.
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Other Kinds of Indirect Investments

2. Life Insurance- life insurance companies

sell insurance policies that also act as a
savings account. A person typically buys life
insurance to provide financial protection for
family members in the event of death. Many
types of life insurance, however, include a
saving provision. An insurance company sets
aside part of each premium (insurance
payment) paid after a policy has been
enforced for a certain period. This amount,
called the cash value of the policy,
accumulates and earns a specified rate of

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interest. In this way, it resembles a savings
account.
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Other Kinds of Indirect Investments

Rent
According to Saluba (2018), rent is a payment of factor of production in excess of
its opportunity costs. It is what is paid to any input in more than you would have to
paid.

The word rent has a special meaning to economics as Saluba (2018) said. To most
people, rent is the money that you need to pay when you use something that is own
by someone else. Technically, the common usage of the term is no different from its
definition in economics, but certainly is not complicated than a monthly rent check.

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Four types of Rent
1. Inframarginal Rent- your best course is
to consider this term “Infra” means below
or under. “Marginal” means at the margin
or the end or last. It is quasi rent earned
by a perfectly competitive firm in the short
run.

2. Pure economic rent- is any payment

made to a factor of production or anything
that is fixed in supply.

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Four types of Rent

3. Quasi Rent- in a perfect competition, firms sell their product for just
what it costs to produce it, so they earn no profit. The price they
receive is equal to the marginal cost of producing the good. Firms can
pay for all their inputs, but they make no profit.

4. Monopoly Rent- They are payments made to a monopolist that are

more than the minimum that the firm would accept.

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Unemployment and Minimum Wage

Unemployment refers to a situation when a person who is actively

searching for employment is unable to find work. Unemployment is a
key measure of the health of the economy. The most frequent
measure of unemployment is the unemployment rate, which is the
number of unemployed people divided by the number of people in the
labor force. Many governments offer unemployment insurance to
certain unemployed individuals who meet eligibility requirements.

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Types of Unemployment

1. Frictional Unemployment- refers to those workers who are in between

jobs. An example is a worker who recently quit or was fired and is
looking for a job in an economy that is not experiencing a recession. It
is not an unhealthy thing because it is usually caused by workers trying
to find a job that is most suitable to their skills.

2. Cyclical unemployment- is the component of overall unemployment

that results directly from cycles of economic upturn and downturn.
Unemployment typically rises during recessions and declines during
economic expansions. Moderating cyclical unemployment during
recessions is a major motivation behind the study of economics and the
goal of the various policy tools that governments employ to stimulate

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the economy.
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3. Structural unemployment- happens when
the skills set of a worker does not match the skills
demanded by the jobs available, or alternatively
when workers are available but are unable to
reach the geographical location of the jobs

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