Final answer:
Investments help your money grow faster than inflation, driven by expectations of future profits and overall economic growth. During periods of increased business confidence, investment tends to rise, while it falls during economic downturns. Long-term investments in education, infrastructure, and technology contribute to economic growth.
Step-by-step explanation:
Investments usually allow your money to grow at a faster rate than general price levels, which is crucial to outpace inflation. The growth in investments contributes to the economy by increasing the capital available for businesses to expand, which in turn can lead to higher levels of production and economic expansion. Expectations of future profits drive investment benefits; businesses invest more when they anticipate a growing market for their goods, as happened in the U.S. during the second half of the 1990s.
However, during periods of economic decline, such as the recession in 2001, investment levels can drop significantly, demonstrating the sensitivity of investment to changes in business confidence. Over time, the effects of growth-oriented policies, including education, physical capital investments, and technological advancements, can contribute to the overall economic growth, making investments a critical part of financial and economic strategies.