ECON211 Lecture 4: Econ lecture 4
16 Dec 2016
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Savings: part of current income not devoted to consumption expenditure- that is, not devoted to satisfying current needs- ow variable. Wealth/ net worth: value of the stock of assets (less liabilities) accumulated from saving- assets can be physical or nancial- stock variable. Financial assets: include money, shares and interest bearing securities. Physical assets: include property, valuables such as gold and diamonds and consumer durables such as a car, refrigerator, tv, etc. Savings rate: how much of a dollar of income is devoted to saving. Types of savings: precautionary: due to economic uncertainty e. g. following the gfc, life cycle: saving for a point in their life cycle, so they can maintain the desired level of wealth e. g. retirement. Wealth itself provides a ow of income e. g. dividends from shares, rent from property. Wealth can reduced and become a direct source of nancing consumption expenditure- dis-saving .
