Question

3. The meaning of saving and investment

Classify each of the following based on the macroeconomic definitions of saving and investment.

	Saving	Investment
Clancy purchases a new condominium in Dallas.
Eileen purchases stock in Goohoo, an information technology company.
Becky purchases new ovens for her cupcake-baking business.
Alex purchases a certificate of deposit at his bank.

Answer 1

1.Clancy purchases a new condominium in Dallas.-Investment

Buying a new house counts as investment

2.Eileen purchases stock in Goohoo, an information technology company.-Saving

Since there is an only transfer of funds, no real investment as yet, this is counted as saving.

3.Becky purchases new ovens for her cupcake-baking business.-Investment

New equipment is purchased for business so this is an investment

4.Alex purchases a certificate of deposit at his bank.-Saving

There is an only transfer of funds so this is saving.