Multiple Choice Questions Page 176 AND Problems and Applications Pages 176 177 problems 7 and 13

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Name Professor Course Date Multiple Choice Questions, Problem, and Application Question 1 According to the problem, David will be the shareholder while Max will be the bondholder. It is because bondholders are the lenders while shareholders are the owners. They are paid through sharing of profits while bondholders get paid through interests. Question 7 The difference between savings and investment as defined by a macroeconomist is as follows; in the minds of economists and how they understand the two terms, investment and savings are supposed to be equal in the economy at equilibrium. Therefore, the term investment means the act buying of new capital which can include buildings and equipment. It is expected to bring returns or income from the sum put in to purchase the asset. For it to qualify as an investment, it must not add to the national economy as it is recognized as a saving rather than an investment. Therefore one can borrow a loan to invest. Savings, on the other hand, are those sums that individuals keep in banks. They tend to occur when one has a more significant income than the spending. They then take the excess to the banks to save them for future use. Through this, they add money to the national economy. This is where the difference between investment and savings comes in that, in savings money is inserted into the economy in one way or another. While an investment, one can borrow loan from savings gathered from other people into these financial institutions. Then put them into the invest and later pay the mortgage with interest. My family took out a mortgage to buy a new house would be categorized as an investment since when one buys a house,

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