Compare and contrast the concepts of income and wealth. Are these measured as a stock or a flow? Explain
What will be an ideal response?
Wealth, or net worth, is the total value of what an entity owns minus what it owes. It is a stock measure because wealth is measured at a given point in time. Income is the sum of all wages, salaries, profits, interest and other forms of earnings for an entity over a given period of time. Because it is measured over a period of time, it is a flow measure.
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Suppose a country produces only bikes and clothing. The country achieves an efficient allocation of resources when
A) it can't produce any more bikes unless it gives up clothing. B) it produces equal amount of bikes and clothes. C) the marginal social benefit of producing a bike equals the marginal social cost of producing a bike. D) the prices charged for the goods are as low as possible.
The multiplier can be calculated by dividing:
a. The initial change in spending by the change in real GDP b. One by one minus the marginal propensity to invest c. The change in real GDP by the initial change in spending d. One by one minus the marginal propensity to save