Question

How to calculate saving and investment by product method?

Answer 1

Hello!!

saving takes place when people abstain from consumption, that is, when they consume less than their income.  Investment takes place when we purchase new capital equipment or other assets that make for future productivity.  Investment does not mean buying stocks or bonds.  Here are some important facts:

·                                            For Robinson Cruse, the difference between saving and investment is a distinction without a difference.  Since he does all saving and all investment, they are automatically equal.  However, for the larger economy, this is not true. Investment funds come either from our own saving or from someone else's saving.

·                                            The motive for saving is one of deferring your consumption to a later day.  We save when we consume only part of our income now and save for retirement, a rainy day, putting children through college, the summer home, etc.

·                                            The motive for investment is to make money.  Investment takes place when we purchase plants or equipment, which make workers and businesses more productive in the future.

·                                            Ultimately saving and investment must be equal, (subject to a couple of complications that make for nice exam questions).  As you will see in a moment, you can think of saving as a supply of funds for investment and investment as a demand for funds.  We will later draw supply and demand curves and show how saving and investment are equated.

ving takes place when people abstain from consumption, that is, when they consume less than their income.  Investment takes place when we purchase new capital equipment or other assets that make for future productivity.  Investment does not mean buying stocks or bonds.  Here are some important facts:

·                                            For Robinson Cruse, the difference between saving and investment is a distinction without a difference.  Since he does all saving and all investment, they are automatically equal.  However, for the larger economy, this is not true. Investment funds come either from our own saving or from someone else's saving.

·                                            The motive for saving is one of deferring your consumption to a later day.  We save when we consume only part of our income now and save for retirement, a rainy day, putting children through college, the summer home, etc.

·                                            The motive for investment is to make money.  Investment takes place when we purchase plants or equipment, which make workers and businesses more productive in the future.

·                                            Ultimately saving and investment must be equal, (subject to a couple of complications that make for nice exam questions).  As you will see in a moment, you can think of saving as a supply of funds for investment and investment as a demand for funds.  We will later draw supply and demand curves and show how saving and investment are equated.

ving takes place when people abstain from consumption, that is, when they consume less than their income.  Investment takes place when we purchase new capital equipment or other assets that make for future productivity.  Investment does not mean buying stocks or bonds.  Here are some important facts:

·                                            For Robinson Cruse, the difference between saving and investment is a distinction without a difference.  Since he does all saving and all investment, they are automatically equal.  However, for the larger economy, this is not true. Investment funds come either from our own saving or from someone else's saving.

·                                            The motive for saving is one of deferring your consumption to a later day.  We save when we consume only part of our income now and save for retirement, a rainy day, putting children through college, the summer home, etc.

·                                            The motive for investment is to make money.  Investment takes place when we purchase plants or equipment, which make workers and businesses more productive in the future.

·                                            Ultimately saving and investment must be equal, (subject to a couple of complications that make for nice exam questions).  As you will see in a moment, you can think of saving as a supply of funds for investment and investment as a demand for funds.  We will later draw supply and demand curves and show how saving and investment are equated.