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