Econ HW 2 - Homework #2 1. a. To a lay person,...

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Homework #2 1. a. To a lay person, “investment” particularly means financial investment, and it is the same thing as saving. For example, one uses part of his/her income to buy financial assets, such as stocks, bonds and mutual funds, and hope to yield more money. To an economist, “investment” is different from saving. It means capital investment. For instance, a firm buys more machines or assembly line, and hope to yield more products in order to yield more income in the future. b. According to the article, the key reason for people in favor of increasing saving rate is that aggregate saving is equal to investment. Constant low saving rate means a low investment rate. The problem is that low investment rate slows down the growth of labor productivity, and further impacts the increase of real income and improvement of standard living. Also, some proponents of increasing saving rate worry that some foreign countries may reluctant to purchase US assets, which could cause decrease in the US
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Econ HW 2 - Homework #2 1. a. To a lay person,...

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