Question

Classify each of the following based on the macroeconomic definitions of saving and investment. Saving Investment Teresa purchases stock in NanoSpeck, a biotech firm. Neha borrows money to build a new lab for her engineering firm. Sam takes out a loan and uses it to build a new cabin in Montana. Lorenzo purchases a corporate bond issued by a car company.

Answer 1

Answer:

Based on the macroeconomic definitions of saving and investment,

the following actions can be classified as investments:

• Teresa purchases stock in NanoSpeck, a biotech firm.
• Neha borrows money to build a new lab for her engineering firm.
• Sam takes out a loan and uses it to build a new cabin in Montana.
• Lorenzo purchases a corporate bond issued by a car company.

Explanation:

In macroeconomics, savings is defined as whatever is left over after income is spent on consumption of goods and services while investment is what is spent on non consumable but durable goods and services which includes real estate, bonds, etc.

Based on this definition, all the options listed qualify as investments.

There exist purchase of non consumables such as

1. Stock in NanoSpeck, a biotech firm and Lorenzo purchasing a corporate bond issued by a car company.
2. Investment in real estate in the case of borrowing money build a new lab for an engineering firm as well as a new cabin in Montana.