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ABSOLUTE POVERTY LEVEL: The amount of income a person or family needs to purchase an absolute amount of the basic necessities of life. These basic necessities are identified in terms of calories of food, BTUs of energy, square feet of living space, etc. The problem with the absolute poverty level is that there really are no absolutes when in comes to consuming goods. You can consume a given poverty level of calories eating relatively expensive steak, relatively inexpensive pasta, or garbage from a restaurant dumpster. The income needed to acquire each of these calorie "minimums" vary greatly. That's why some prefer a relative poverty level.
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                           NET PRIVATE DOMESTIC INVESTMENT: Expenditures on capital goods to be used for productive activities in the domestic economy that are undertaken by the business sector during a given time period, after deducting capital depreciation. This is the official item in the National Income and Product Accounts maintained by the Bureau of Economics Analysis measuring net capital investment expenditures. More specifically net private domestic investment is found by subtracting the capital consumption adjustment from gross private domestic investment. Its primary function is to measure the net increase in the capital stock resulting from investment. Net private domestic investment indicates the total amount of investment in capital by the business sector that is actually used to expand the capital stock. In general, capital depreciation is between 50 to 85 percent of gross investment. This places net private domestic investment in the range of 5 to 10 percent of gross (and net) domestic product. While net private domestic investment is generally positive, meaning gross investment exceeds depreciation, it is possible for negative net investment, meaning depreciation exceeds gross investment. A Specific MeasureAs the three modifiers in this term suggest, net private domestic investment is a relatively specific measure of investment. It is a net (versus gross) measure of private (versus public) domestic (versus foreign) investment.- Net: Net private domestic investment includes ONLY the production of capital goods that are not used to replace depreciated capital. Adding capital depreciation (officially the capital consumption adjustment) to net private domestic investment results in gross private domestic investment.
- Private: Moreover, net private domestic investment measures investment expenditures made by the private sector. Any capital goods purchased by the public, or government, sector is included in government consumption expenditures and gross investment.
- Domestic: And lastly, net private domestic investment is expenditures on capital goods used in the domestic economy. The alternative is investment expenditures on capital goods used by the foreign sector.
Derived from Gross InvestmentThe derivation of net private domestic investment can be found by subtracting the capital consumption adjustment from gross private domestic investment. This is analogous to the derivation of net domestic product. In both cases the capital depreciation is subtracted from the gross value to derive the net value. The following equation summarizes the relation between net private domestic investment (NPDI), gross private domestic investment (GPDI), and the capital consumption adjustment (CCA):
Recommended Citation:NET PRIVATE DOMESTIC INVESTMENT, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2022. [Accessed: January 20, 2022].
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Ragnar Frisch and Jan Tinbergen were the 1st Nobel Prize winners in Economics in 1969.
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