Question

Classify each of the following based on the macroeconomic definitions of saving and investment.
a. Saving Investment Eric takes out a loan and uses it to build a new cabin in Montana.
b. Cho purchases new ovens for her cupcake-baking business.
c. Ginny purchases stock in Pherk, a pharmaceutical company.
d. Bob purchases a corporate bond issued by a car company.

Answer 1

Answer:

a. Investment

b. Investment

c. Savings

d. Savings

Explanation:

In economics investments are defined as the one with which one targets to earn more, and that is generally a long term activity.

As in the given statement a and b, making a cabin will be an investment in the form of long term asset and purchasing ovens will provide assistance in running business and is therefore, an investment.

Savings are the amount kept aside for future needs, whether in form of cash or some liquid assets.

In statement c and d, stock and corporate bond both are savings as are easily convertible into money in short span of time.