Economics:
10th Edition
ISBN: 9781285859460
Author: BOYES, William
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
Define the term Net Investment?
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
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- 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.arrow_forward2. 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 $470 million. Enter the amount for government purchases. National Income Account Government Purchases (G) Taxes minus Transfer Payments (T) Consumption (C) Investment (I) Value (Millions of dollars) $ 90 250 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) million 120arrow_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_forward
- 1. Calculate private household savings. Show your work. 2. Calculate net investment. Did the capital stock for this economy increase, decrease, or not change for the year?arrow_forwardWhat is the difference between financial investment and economic investment? 1) There is no difference between the two. 2) Financial investment refers to the purchase of financial assets only; economic investment refers to the purchase of any new or used capital goods. 3) Economic investment is adjusted for inflation; financial investment is not. 4) Financial investment refers to the purchase of assets for financial gain; economic investment refers to the purchase of newly created capital goods.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
- Suppose GDP in this country is $480 million. National Income Account Value (Millions of dollars) Government Purchases (GG) 150 Taxes minus Transfer Payments (TT) 180 Consumption (CC) 225 Investment (II) 105 Complete the following table by using national income accounting identities to calculate private and public saving. In your calculations, use data from the initial table. Private SavingPrivate Saving = (YTI, TG, YCT) = = ?million Public SavingPublic Saving = = (CT, TG, YCT, YTI) = = $millionarrow_forwardDraw a savings and investment graph. Explain the logic of why investment slopes down and savings slopes up.arrow_forwardPosition each of the following eight terms in the UK’s circular flow of income diagram below: Consumption (of domestically produced goods and services); Net saving; Net taxation; Government expenditure; Factor payments (national income); Expenditure on imports; Investment; Expenditure on exports. Economists use specific letters to label each of these terms. The letters used are: S, G, X, M, I, Cd, T, Y Attach the correct letter to each of the terms you have written on the diagram.arrow_forward
- Classify each of the following based on the macroeconomic definitions of saving and investment. Saving Investment Crystal borrows money to build a new lab for her engineering firm. Hilary purchases stock in Pherk, a pharmaceutical company. Edison takes out a mortgage for a new home in Detroit. Brian purchases a corporate bond issued by a car company.arrow_forwardWhich 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_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
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