Question

ou invest $1,000 in stocks. Would a macroeconomist call this an investment? Why or why not? An economist would say no, because you are just buying an existing asset without creating any new productive capacity in the economy. yes, because you are purchasing something that may yield more value later. yes, because there is a concensus amongst Wall St. that this is considered an investment. no, because the minimum threshold for a stock purchase to be considered an investment is $10,000.

Answer 1

Investing $1,000 in stocks is not considered an 'investment' by macroeconomic standards, as it doesn't create new productive capacity. Economists reserve the term 'investment' for spending on capital goods that contribute to GDP, like commercial real estate and equipment.

Step-by-step explanation:

Within the context of macroeconomics, when you invest $1,000 in stocks, this would not typically be called 'investment' in the economic sense. Macroeconomists define investment as business spending on new capital goods like commercial real estate, equipment, residential housing construction, and inventories. It involves creating new productive capacity in the economy rather than just transferring ownership of existing financial assets. Therefore, the purchase of stocks is different from business investment in that it does not directly contribute to the Gross Domestic Product (GDP), which measures economic production and growth.

Stock purchases are considered investments from a personal finance perspective because they can potentially return a profit in the future. However, in terms of economic indicators like GDP, business investment refers to the creation of new capital goods that contribute to producing goods and services within the economy.

Answer 2

An investment of $1,000 in stocks:

yes, because you are purchasing something that may yield more value later.

Step-by-step explanation:

While Macroeconomics tries to explain aggregate phenomena such as economic growth, business cycles, unemployment, inflation, etc., this does not preclude this branch of economics from agreeing with a fact. An investment remains an asset which the investor purchases in order to generate more future income.