Introduction to the U.S. Economy: Business Investment [Updated November 14, 2019]   [open pdf - 451KB]

From the Document: "Business investment is spending by private businesses and nonprofits on long-lasting assets, also known as physical capital, that assist in the production of goods and services. Physical capital is generally grouped into three categories: equipment (e.g., machinery or computers), structures (e.g., offices or warehouses), and intellectual property (e.g., software development or research and development). Through investment, businesses can build up their stock of physical capital, which increases their capacity to produce goods and services. For example, when a restaurant purchases an additional grill, it increases its capacity to prepare food at a given time. However, physical capital tends to become less productive over time due to wear and tear and eventually must be replaced as it breaks down. This process is referred to as depreciation. For a firm to continually increase its stock of physical capital, and therefore its productive capacity, it must invest in new physical capital faster than its current physical capital is depreciating. The same goes for the economy as a whole-- for the economy's stock of physical capital to increase, the investment rate must exceed the rate at which physical capital depreciates."

Report Number:
CRS In Focus, IF11020
Public Domain
Retrieved From:
Congressional Research Service: https://crsreports.congress.gov/
Media Type:
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