Explain the difference between saving and investment as defined by a macroeconomist. Which of the following...

Explain the difference between saving and investment as defined by a macroeconomist. Which of the following situations represent either investment or saving? Explain.
1. Your family takes out a mortgage and buys a new house.
2. You use your $200 paycheque to buy stock in Bombardier (Canadian company).
3. Your roommate earns $100 and deposits it into her account at a bank.
4. You borrow $1,000 from a bank to buy a car to use in your pizza delivery business.

Solutions

Expert Solution

Let us understand the basic details about the Saving and Investment.

Saving : This defines that when a person's income exceeds his consumption is called as savings which means the leftover income after all your consumption.in simple terms it is the income which is not consumed.

Investment : investment is nothing but when a person buys new capital in order to build something up.which may be a house or vehicle or business equipment (machinery).

A)It is investment.

Explanation:

it comes under the investment because you are spending money to buy new capital. which means you are spending money to buy a house by taking a loan.

B) It is saving.

Explanation :

it will come under-saving because your income of $200 is not being spent on consumption goods.you are saving your income of $200 in the form of buying stock in AT&T.

C)It is saving.

Explanation :

Obviously it is saving because your freind is saving money in her account not spending it on consumption goods.

D) It is investment.

Explanation:

It comes under investment because you are buying a car as a capital good to expand your pizza delivery business which interms spending money to buy capital good to build something up.

Rahul Sunny answered 9 months ago

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