Unformatted text preview: and distinctly. Consider an example. Suppose that Larry earns more than he spends and de-posits his unspent income in a bank or uses it to buy a bond or some stock from a corporation. Because Larry’s income exceeds his consumption, he adds to the na-tion’s saving. Larry might think of himself as “investing” his money, but a macro-economist would call Larry’s act saving rather than investment. In the language of macroeconomics, investment refers to the purchase of new capital, such as equipment or buildings. When Moe borrows from the bank to build himself a new house, he adds to the nation’s investment. Similarly, when the U SING SOME OF YOUR INCOME TO BUY STOCK? MOST PEOPLE CALL THIS INVESTING. M ACROECONOMISTS CALL IT SAVING....
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- Spring '10
- Finance, National Income Accounts