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7 November, 16:39

Classify each of the following based on the macroeconomic definitions of saving and investment. 1. Susan borrows money to build a new lab for her engineering firm.

2. Becky purchases stock in Pherk, a pharmaceutical company.

3. Raphael buys a government bond.

4. Alex purchases a new condominium in Chicago.

Answers (1)
  1. 7 November, 18:33
    1. Investment

    2. Savings

    3. Savings

    4. Investment


    In macroeconomics we define the savings as an outcome of earnings not spent.

    And that the investment is amount spent on sources generating long term income, and increasing the wealth, that is durable.

    The money borrowed for building a lab, will create a capital asset for the company with which the company can generate the funds and earnings.

    The stock purchased is reflection of extra money available with the company, that represents savings.

    Government bonds also reflects the utilization of savings.

    Condominium is a huge building or complex, again capital in nature, creates an investment for the company.
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