leakages and injections (1 Viewer)

[omnipotent]

Just a couple of questions to help me with my budget essay.
In terms of injections: if the government spends money on investment, does that count as expenditure, investment or both?

Also is the purchase of a house considered a saving or an investment?

 

[aero135]

yes it can be both!

hmmmm whats the houses purpose is it an investment property? NO its not a saving mate!

 

[semper fidelis]

depends on the purpose

a holiday house in a fallin price market is not an investment

 

[omnipotent]

Well, I'm trying to say that by the government spending money on investment, it increases the injections into the economy. So thatnks for confirming that.

But i'm also saying that by extending the home owners grant, it "subsidises" people to purchase a house, and increases investment.

 

[gnrlies]

I think that people here are forgetting that in the old C+I+G+X-M breakdown of AD, G is a separate component within itself. G does not fit into C or I, it is its own component G. Perhaps the reason for this is to avoid such classification issues.

In anycase it doesn't really matter because C,I,G,X all have the same effect in terms of their positive impact on AD. So $1 of C is equivalent to $1 of I,G or X. The only difference of course is that some components are income dependent (i.e. C) whilst others are not (i.e. G). Also some expenditures such as I will increase productive capacity which adds another dimension.

These things are not of importance in anycase.

Try to think like economists instead of accountants.

 

[aero135]

checkmate~!