What is an example of an investment spending component in demand?

Investment spending refers to expenditures on goods that are used for future production, which adds to the productive capacity of the economy. Government spending on infrastructure is a prime example of this type of investment. When governments invest in infrastructure, such as transportation systems, bridges, and public facilities, these projects support economic growth by enhancing connectivity, improving efficiency, and creating jobs. This type of spending not only directly impacts the economy through the immediate employment it creates but also indirectly benefits the broader economic landscape by fostering an environment conducive to business operations and growth.

The other choices, while they represent important components of demand, do not fit the specific definition of investment spending in the same way. Household purchases of clothing, for instance, are considered consumption spending rather than investment, since they do not contribute to future productive capacity. Consumer goods sales also fall under consumption spending. Sales of foreign goods relate to trade balances and consumption rather than domestic investment, which further clarifies why government spending on infrastructure is the correct example of investment spending in demand.