Which investment type includes business purchases of machinery?

The correct answer is business fixed investment because it specifically refers to spending by businesses on long-term assets that will be used to produce goods or services. This includes the purchase of machinery, equipment, and facilities that are essential for the business operations and production processes. Business fixed investment is crucial for enhancing productive capacity, enabling companies to increase efficiency, innovate, and respond to demand cycles.

Other options do not fit this context as accurately. Residential fixed investment pertains to spending on residential structures like homes and apartment buildings, which does not include machinery. Consumer investment typically refers to spending by households on durable goods or assets, not including business-related purchases. Capital investment is a broader term that can encompass various forms of investment including both business and residential investments; however, it does not specifically point to the business context in which machinery purchases are made. Therefore, business fixed investment is the most precise choice for this type of expenditure.