Question

Indicate whether each of the following descriptions represents saving or investment, as defined by a macroeconomist.

a. This occurs when a person's income exceeds his consumption.
b. This occurs when a person or firm purchases new capital.

Indicate whether each of the following situations represents saving or investment.

1. You use your $200 paycheck to buy stock in AT&T.
2. You borrow $1,000 from a bank to buy a car to use in your pizza delivery business.
3. Your family takes out a mortgage and buys a new house.
4. Your roommate earns $100 and deposits it in his account at a bank.

Answer 1

Answer: See explanation

Step-by-step explanation:

a. This occurs when a person's income exceeds his consumption. - This is savings.

b. This occurs when a person or firm purchases new capital. - This is investment.

1. You use your $200 paycheck to buy stock in AT&T. - This is savings since the money isn't used to make a capital purchase for ones business.

2. You borrow $1,000 from a bank to buy a car to use in your pizza delivery business. - This is investment as the car will be used for ones business. The consumption is made to help the business.

3. Your family takes out a mortgage and buys a new house. - This is investment as a new capital is bought.

4. Your roommate earns $100 and deposits it in his account at a bank. - This is savings as no consumption is involved.