PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
7th Edition
ISBN: 9781260110920
Author: Frank
Publisher: MCG
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Chapter 9, Problem 1RQ
To determine
Determine the relation between wealth and saving.
Expert Solution & Answer
Explanation of Solution
The wealth measures the current value of a stock of assets owned by someone or society as a whole. That means, the wealth is a stock variable. For example, if a person says that ‘I have $10,000 in my bank account’, then it is the wealth of that person for that particular moment whereas saving is a flow variable, which is measured as per the unit of time. For example, if a person says that ‘I save $10 per week’, then it indicates one-week savings of that person. Here, the amount of wealth is increased at a growth rate of $20 per weeks.
Saving is not the only source that increases the wealth of a person. The value of wealth will also increase when the value of the assets held by an individual rise, this is called the
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PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
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