Question

Your friend claims that he has invested in stocks and bonds. As a budding economist, would...

Your friend claims that he has invested in stocks and bonds. As a budding economist, would you agree/disagree with your friend's claim?

Homework Answers

Answer #1

Even though purchase of stock and bonds is called "investment" in Finance, in economic sense, stock and bond purchase is not considered as an investment.

Purchase of stocks and bonds are mere transfer of ownership of existing assets from one asset-holder to another. This does not create any new assets. The Investment component of GDP in economic sense includes residential investment, non-residential (business fixed) investment and addition to business inventory. Stocks, bonds and other financial assets do not fall into any of these categories, therefore they are not treated as investment as they do not contribute to the country's GDP.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Your friend says that a motor and a generator are fundamentally different devices. Would you agree...
Your friend says that a motor and a generator are fundamentally different devices. Would you agree or disagree? Defend your position.
1. a: a friend argues that if a nation has a large budget deficit it must...
1. a: a friend argues that if a nation has a large budget deficit it must also have a large level of debt. Explain why you agree or disagree. b: a friend claims a nation should always have a balanced federal budget. Do you agree? Why or why not.
Your friend claims he has a fair coin; that is, the probability of flipping heads or...
Your friend claims he has a fair coin; that is, the probability of flipping heads or tails is equal to 0.5. You believe the coin is weighted. Suppose a coin toss turns up 15 heads out of 20 trials. At α = 0.05, can we conclude that the coin is fair (i.e., the probability of flipping heads is 0.5)? You may use the traditional method or P-value method.
Your friend is a hedge fund manager. He tells you that he has earned 6% returns...
Your friend is a hedge fund manager. He tells you that he has earned 6% returns on average above the S&P 500 return over the past five years, so he doesn’t believe in efficient market. Do you agree with him? Explain.
Assume that your friend claims that he can run 20 km in less than an hour...
Assume that your friend claims that he can run 20 km in less than an hour and a professional sports team will recruit him after graduation based on this outcome so he does not worry about his GPA at the university. You would like to test this claim and take a random sample of 34 runs this year and find that he averaged 58.2 minutes. Assume that the standard deviation of his runs is 8.5 minutes and it is normally...
Would you prefer to invest in bonds or stocks? Give reasoning to support your choice.
Would you prefer to invest in bonds or stocks? Give reasoning to support your choice.
Your friend decides to roll a die repeatedly to analyze whether the probability of a six...
Your friend decides to roll a die repeatedly to analyze whether the probability of a six on each flip is 1/6. He rolls the die 10 times and observes six 7 times. He concludes that the probability of a six for this die is 7/10 = 0.7. Your friend claims that the die is not balanced, since the probability is not 0.166666667. What’s wrong with your friend’s claim? If the probability of rolling a six is 1/6, what would you...
Your friend claims that a certain circuit contains three capacitors but you don't know if they...
Your friend claims that a certain circuit contains three capacitors but you don't know if they are wired in series, parallel, or some combination. The battery has a voltage of 9V, two of the three capacitors have capacitances of 2μF while one has a capacitance of 1μF, and your friend claims that if were you to find the correct equivalent capacitance and replace the three capacitors with that, you would find the charge on the equivalent capacitor to be 1.8...
1. You and your friend are enrolled in two different sections of the Algebra, Functions, and...
1. You and your friend are enrolled in two different sections of the Algebra, Functions, and Data Analysis course. Recently, different midterm tests were given in each section. Since the high school has large class sizes, the test scores in both sections are approximately normally distributed. In your section, the mean was 80 and your score was 92. In your friend's section, the mean was 71 and her score was 83. a) Since your test score of 92 is higher...
your friend just won the lottery. he has a choice of receiving $214,403 a year for...
your friend just won the lottery. he has a choice of receiving $214,403 a year for the next 23 years or a lump sum today. the lottery uses a 14% discount. What would be the lump sum your friend receives
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT