Question

2.  What is considered an investment in macroeconomics? Suppose that LeBron James buys a new contemporary house for himself. Is this considered an investment? Explain. What about if the company "Wabco" buys $1 million worth of stocks in existing companies.

3.  Are the following examples of investment?

a) the purchase of a new robot for painting car parts

b) a new X-ray machine for a  doctor’s office

c) a purchase of $1000 in Google stock

d) new computer software for quality control in production of chemicals

e) a new minivan your family purchases for family trips

f) a purchase of a $500 savings bond for a graduation present

4.  Does Investment always equal Savings in an economy?  Explain.

5.  What is productivity? How is productivity related to the technological development? Give an example.

Answer 1

2.An investment relates to the purchase of a good which is not used for consumption but rather to create future income. It is purchased with the idea that it will provide future income or will be sold in future at a higher rate.

Buying of a contemporary house by James is not an investment because the house is purchased for personal consumption and not for reselling or renting.

Yes, buying of stocks by Walco is an investment because they're purchased will the aim of making profit.

3.

A) yes, it is an investment. Assuming the owner has a business of car parts.

B) yes, it will help in production services of the doctor.

C) yes, they're made will the purpose of making a profit.

D) yes, used in production process.

E) no. The car will be used for personal family consumption.

F) no. The bond is used for purchasing a present which is a type of personal consumption.

4. In one sense, savings and investment are always equal, equilibrium or no equilibrium. In other sense, savings and investment are equal only in equilibrium.

Ex post savings and ex post investment are always equal. (Actual). Owing to the accounting identity of S = I.

However, ex ante savings and ex ante investment may differ. This is due to the fact that person who save are different from the persons who invest in an economy. But through the mechanism of change in income level, ex ante savings and investment level, tend to become equal.

5. Productivity defines how efficiently the production inputs, are being used to produce a given level of output.

When a nation becomes technologically advanced, it applies it applies this new understanding to the production of goods and services to produce more output per input used. In other words, labour can produce goods and services, faster, cheaper or better. That is their productivity rises. Technological development and productivity are hence, positively co-related.