Investment Spending and the U.S. Economy Essay

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Investment Spending and Worker ProductivityThe economy of a country entails more than the sum of every individual’s economic status. In essence, a country’s economy is a collection of the transaction and values beyond a person’s actual cash in hand (Smyth, 2019). Investment spending and labor productivity are some of the factors that shape the economy of a country. An investment is a term used to refer to money or resources spent on something with expectations of future benefits. Investment spending can involve dedicating money to bonds, stocks, and shares or even capital spending. On one hand, investment spending enhances the capacity of a business to create its respective goods and services. On the other hand, investment spending back into the economy stimulates the growth and productivity of the national economy. Worker productivity refers to the number of products and services produced by a group of workers in a specific time period.There is a positive relation or correlation between investment spending and worker productivity. Investment spending is strongly linked to worker productivity as it affects labor market factors like employment absorption. In this case, an increase in investment spending contributes to an increase in employment absorption, which in turn contributes to increased worker productivity. For instance, Habanabakize, Meyer & Olah (2019) found that a 1% increase in investment spending increased employment absorption and worker productivity by 0.188% and 1% respectively. This primarily implies that higher worker productivity is realized when there is an increase in investment spending. The relation between investment spending and worker productivity has significant economic implications. Increased investment spending increases worker productivity and leads to increased economic growth and productivity.

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Therefore, the relation between these two components shapes the level of economic growth and productivity of a country.Recent Investment SpendingCambon (2021) states that business investment is becoming a powerful tool of economic growth in the United States. As a potent source of economic growth, business investment is one of the factors that is likely…

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…on the economy. In essence, the disruption brought by the pandemic is expected to damage the economy.While economic uncertainty affects economic growth and uncertainty, the current uncertainty brought by the global pandemic may not result in lower investment spending. Governments across the globe have adopted various policy measures and actions to help mitigate the effects of the uncertainty. Policy statements and actions by governments have focused on providing some sort of insurance to help mitigate the effects of the pandemic-related economic uncertainty. These measures are expected to play a major role in enhancing investment spending and promoting economic growth and recovery. Following the greater economic uncertainty brought by the pandemic, businesses and investors have been in a race to invest in order to capitalize on the potentially very high market prices in the future (McMahon, 2020). This implies that increased uncertainty leads to more investment by competitive risk-neutral companies. Such companies take advantage of the increased uncertainty to increase business spending in attempts to….....

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