Homework ECO201 Week 3

Homework ECO201 Week 3 - the benefits are diminished and...

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Chapter 25 Questions 3. In what way is a college degree a form of capitol? A college degree is a form of human capitol. Human Capitol raises a nation’s ability to produce goods and services. Human Capitol, like Physical Capitol requires inputs. Instead of the physical tools to do a job however, Human Capitol requires inputs such as teachers, libraries, schools and study time. Students can and should be considered workers or laborers. 5. Does a higher rate of saving lead to higher growth temporarily or indefinitely? In layman’s terms, the more you have of something the less you need. If workers have large quantities of capitol to produce goods with, giving them more, only slightly increases their production. This is called ‘diminishing returns’. Because of diminishing returns, an increase in the saving rate leads to higher growth only for a time. The more capitol is added to the equation,
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Unformatted text preview: the benefits are diminished and growth slows. So, while it may take decades to realize, a higher rate of saving leads to temporary growth. Chapter 26 Question 4. What is investment? How is it related to national saving? In the simplest terms, national savings equals national investment or, the more a nation saves the more it has to invest. If Person X saves his/her money and invests in a financial market, individually they would be investing, but adding to the nation’s savings. When Company Y takes Person X’s savings (in the form of an individual investment) they aren’t planning on ‘saving’ it, but will rather ‘invest’ the capitol in new goods and services required by Company Y in order to produce. This adds to the nation’s investment....
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