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Societies choose what share of their resources to devote to consumption and what share to devote to investment
Societies choose what share of their resources to devote to consumption and what share to devote to investment. Some of these decisions involve private spending; others involve government spending.
For each form of private spending, indicate whether it represents consumption or investment.
|
Private Spending |
Consumption |
Investment |
|
|---|---|---|---|
| Firms buying computers | |||
| People buying automobiles | |||
| Firms buying automobiles for delivery services | |||
| People buying washing machines |
For each form of government spending, indicate whether it represents consumption or investment.
|
Government Spending |
Consumption |
Investment |
|
|---|---|---|---|
| Buying military equipment | |||
| Paying salary to public elementary school teachers | |||
| Building roads | |||
| Building hospitals |
Expert Solution
Answer:
|
Private Spending |
Consumption |
Investment |
||
|---|---|---|---|---|
| Firms buying computers |
investment |
|||
| People buying automobiles |
Consumption |
|||
| Firms buying automobiles for delivery services |
Investment |
|||
|
People buying washing Machines |
Consumption |
|
Government Spending |
Consumption |
Investment |
|
|---|---|---|---|
| Buying military equipment |
Investment |
||
| Paying salary to public elementary school teachers |
Consumption |
||
| Building roads |
Investment |
||
| Building hospitals | Investment |
Private spending :
Consumption : people buying Automobiles and washing machine is termed as consumption because it is a final /consumer good and would be used for personal uses having no further return.
Investment : firm buying buying and automobiles are investments because it would drive more productivity and generate revenues for the firm. So, providing returns . Therefore, termed as investment .
Government spending :
Consumption: paying slary to govt school teachers is consumption as the capital would be observed with no further returns.
Investment : Buying military equipments is an investment as it is safeguarding the country from potential war like situation. There is an expected return out of it.
Similarly, building roads and hospitals are investment as they would provide better better transport movement and improved healthcare .
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