1. Explain the difference between saving and investment
as defined by a macroeconomist. Which of the following
situations represent investment? Saving? Explain.
a. Your family takes out a mortgage and buys a new
house.
b. You use your $200 paycheck to buy stock in AT&T.
c. Your roommate earns $100 and deposits it in her
account at a bank.
d. You borrow $1,000 from a bank to buy a car to use
in your pizza delivery business.
2. Suppose GDP is $8 trillion, taxes are $1.5 trillion, private saving is $0.5 trillion, and
public saving is $0.2 trillion. Assuming this economy is closed, calculate consumption,
government purchases, national saving, and investment.
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