Question

Classify each of the following based on the macroeconomic definitions of saving and investment.

1. Kate borrows money to build a new lab for her engineering firm.
2. Manuel purchases a new condominium in Detroit.
3. Hubert purchases a corporate bond issued by a car company.
4. Poornima purchases stock in Goohoo, an information technology company.

Answer 1

All four reflect Investment

Step-by-step explanation:

Saving is portion of income kept aside from consumption, for further precautionary purposes.

Investment is the addition to capital stock of by a person or enterprise.

1. 'Kate borrows money to build a new lab for her engineering firm' : is an Investment as it adds capital stock i.e lab in his engineering firm
2. Manuel purchases a new condominium in Detroit : is an Investment as it is addition to his real estate capital stock
3. Hubert purchases a corporate bond issued by a company : is an investment as it is addition to financial capital stock
4. Poornima purchases stock in Goohoo, an IT company : is an Investment as it is addition to financial capital stock