Lecture_7

Lecture_7 - Lecture 7 Principles of Macroeconomics Econ 2...

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Lecture 7 Principles of Macroeconomics Econ 2 Winter, 2008
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Question #3 The price of a good tomorrow is: A) ( 1 + R ) B) (1 – R ) C) (1 – R ) * (1 – R ) D) 1 / ( 1 + R ) E ) R
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Question #3 The price of a good tomorrow is: D) 1 / ( 1 + R )
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More on Savings and Investment Why do people save? Retirement (life-cycle reasons) Children’s education Emergencies Job loss
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More on Savings and Investment At the national level Important for investment and economic growth
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Savings and Wealth Saving Current income minus spending on current needs Saving Rate Saving divided by income
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Household Saving Rate
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Household Saving The downward trend has caused quite a stir in the media In fact, in January 2008 the personal savings rate was: -.10 % - Source: BEA - http:// www.bea.gov/newsreleases/national/pi/pine wsrelease.htm
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Household Saving
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Household Saving Does this seem like a problem? If you don’t save won’t you run into trouble?
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Household Saving Does this seem like a problem? If you don’t save won’t you run into trouble? Not necessarily!
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Saving and Investment First, funds can come from abroad Other countries may be willing to fund our investment
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Savings and Investment 1996-2001 US personal saving rate average: 3.1% US GDP average growth: 3.6% Japan personal saving rate average: 11.4% Japan GDP average growth: 1%
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Household Saving The U.S. personal saving rate is much lower than many other countries:
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Household Saving The U.S. personal saving rate is much lower than many other countries, why? Many possible reasons
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Many possible reasons Life-cycle: retirement Social Security and medicare have reduced the need to save Life-cycle: buy a home Relatively easy to do in U.S. Precautionary
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Lecture_7 - Lecture 7 Principles of Macroeconomics Econ 2...

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