A country’s economy expands with the improvement of capital goods structures and the increase of capital stock. This is all tied to capital investment. Without it, no economic expansion would be possible. When investors buy capital goods like factories, machineries, transportation, computers, tools, instruments, or anything that leads to people being more productive, the money used to purchase all this is then termed capital investment. The important thing to consider is that the equipment (bought by financial capital), would need humans to design, build and operate.
Now let’s get to the interesting part – how all this helps our economy expand. When capital goods are improved, the more productive we all become. Look at the fisherman who once fished with a small boat and a small net. He invested in a bigger boat, and some machinery to haul his new mammoth-sized net. He caught more fish than he ever did before. Mr. Fisherman now has a bigger house, an extra car, and a better life. Little did he know that he helped the economy expand.
Another great thing about the increase of a country’s capital investment is the subsequent improvement in the quality of research and development – in businesses. Better R&D means higher productivity. Workers are more efficient and what they produce are better. Then they become like Mr. Fisherman, with his better life.