Macroeconomics (MindTap Course List)
10th Edition
ISBN: 9781285859477
Author: William Boyes, Michael Melvin
Publisher: Cengage Learning
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Question
Chapter 9, Problem 2E
To determine
Differences between flow varibale and stock varibale and classification as stock or flow.
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Explain the difference between a flow variable and a stock variable. Classify each of the following as a stock or a flow: income, wealth, saving, savings, consumption, investment, government expenditures, net exports, GDP
2. Saving and investment in the national income accounts
The following table contains data for a hypothetical closed economy that uses the dollar as its currency.
Suppose GDP in this country is $900 million. Enter the amount for government purchases.
National Income Account
Government Purchases (G)
Taxes minus Transfer Payments (T)
Consumption (C)
Investment (1)
National Saving (S) =
Complete the following table by using national income accounting identities to calculate national saving. In your calculations, use data from the
preceding table.
=
Value
(Millions of dollars)
$
325
375
275
million
Classify each of the following based on the macroeconomic definitions of saving and investment.
Saving
Investment
Neha borrows money to build a new lab for her engineering firm.
Teresa purchases stock in Pherk, a pharmaceutical company.
Sam purchases a new condominium in San Francisco.
Lorenzo purchases a certificate of deposit at his bank.
Chapter 9 Solutions
Macroeconomics (MindTap Course List)
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Similar questions
- Classify each of the following based on the macroeconomic definitions of saving and investment.arrow_forwardExplain the difference between saving and investment as defined by a macroeconomist. Which of the following situations represent investment and which represent saving? Explain.a. Your family takes out a mortgage and buys a new house.You use your $200 paycheck to buy stock in Africel.Your roommate earns $100 and deposits it in his account at a bank.You borrow $1,000 from a bank to buy a car to use in your pizza delivery business.The interest rate is 7 percent. Use the concept of present value to compare $200 to be received in 10 years and $300 to be received in 20 years.A company has an investment project that would cost $10 million today and yield a payoff of $15 million in 4 years.Should the firm undertake the project if the interest rate is 11 percent? 10 percent? 9 percent? 8 percent?Can you figure out the exact cutoff for the interest rate between profitability and nonprofitability?arrow_forwardThe following table contains data for a hypothetical closed economy that uses the dollar as its currency. Suppose GDP in this country is $800 million. Enter the amount for government purchases. Value National Income Account A (Millions of dollars) Government Purchases (G) Taxes minus Transfer Payments (T) 260 Consumption (C) 300 Investment (I) 300 Complete the following table by using national income accounting identities to calculate national saving. In your calculations, use data from the preceding table. National Saving (S) %24 million Complete the following table by using national income accounting identities to calculate private and public saving. In your calculations, use data from IL ||arrow_forward
- Draw a savings and investment graph. Explain the logic of why investment slopes down and savings slopes up.arrow_forwardSummarize the leading theories to explain each type of investment.arrow_forwardWhich of the following is true of disposable income? Group of answer choices It excludes transfer payments. It is the portion of income that is used solely for consumption. It is the part of total earned income that is paid to the government in the form of taxes. It is the difference between income and saving. It equals consumption expenditures plus savingarrow_forward
- Which of the following situations represents investment? Saving? ExplainYour family takes out a mortgage and buys a new house. You use your paycheque to buy stock in Sagicor Financial Services.arrow_forwardHow does a decrease in the tax rate on income earned on saving affect saving, investment, the interest rate, and economic growth?arrow_forwardIn each part that follows, use the economic data given to find national saving, private saving, public saving, and the national saving rate. a. Household saving = 200 Business saving = 400 Government purchases of goods and services = 120 Government transfers and interest payments = 100 Tax collections = 175 GDP = 2,300 Instructions: Enter your response for the national saving rate rounded to one decimal place. If you are entering any negative numbers, be sure to include a () In front of those numbers. National saving Private saving Public saving National saving rate GOO b. GDP = 6,050 Tax collections = 1,225 Government transfers and interest payments - 400 Consumption expenditures 4,500 Government budget surplus 100 Instructions: Enter your response for the national saving rate rounded to one decimal place, If you are entering any negative numbers, be sure to include a () in front of those numbers. National saving Private saving Public savingNational saving rate 100 c Consumption…arrow_forward
- Practice: some examples of related stocks and flows that we study in future units. A person's wealth is a stock; his income and expenditure are flows. The number of people getting their jobs is a number of employed people is a ; The The amount of capital in the economy is a the amount of investment is a The government budget deficit is a debt is a ; the governmentarrow_forwardExplain how changes in interest rates and rates of return on various investment options will affect the amount of money that businesses are willing to invest to increase output.arrow_forwardWrite an essay discussing the determinants of national income, consumption, saving and investments, modelling the economy and the government sectorarrow_forward
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