Week 3 Answers - 1 Explain the difference between saving and investment as defined by a macroeconomist To a macroeconomist saving occurs when a

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1. Explain the difference between saving and investment as defined by a macroeconomist. To a macroeconomist, saving occurs when a person’s income exceeds his consumption , while investment occurs when a person or firm purchases new capital , such as a house or business equipment. 2. Decide whether each of the following represents saving or investment and explain your answer. a. Your family takes out a mortgage and buys a new house. When your family takes out a mortgage and buys a new house, it is investment because it is a purchase of new capital. b. You use your $200 paycheck to buy stock in AT&T. When you use your $200 paycheck to buy stock in AT&T, it is saving because your income of $200 is not being spent on consumption goods. c. Your roommate earns $100 and deposits it in her account at a bank. When your roommate earns $100 and deposits it in her account at a bank, it is saving because the money is not spent on consumption goods. d. You borrow $1,000 from a bank to buy a car to use in your pizza delivery business. When you borrow $1,000 from a bank to buy a car to use in your pizza-delivery business, it is investment because the car is a capital good. 3.
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This note was uploaded on 06/20/2011 for the course ECON 211 taught by Professor Morrison during the Spring '10 term at Wayne State University.

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Week 3 Answers - 1 Explain the difference between saving and investment as defined by a macroeconomist To a macroeconomist saving occurs when a

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