Financial Markets - The Demand for Money - Semantic Traps: Money, Income and Wealth
4 important questions on Financial Markets - The Demand for Money - Semantic Traps: Money, Income and Wealth
What is income? Is it a flow or stock variable?
- Income is what you earn from working
plus what you receive in interest and dividends. - It is a
flow—that is, it is expressed per unit of time.
What is saving? Is it a flow or stock variable?
- Saving is that part of after-tax income that is not spent.
- It is also a flow(=stroomgrootheid).
What is (financial) wealth? Is it a flow or stock variable?
- Your financial wealth, or simply wealth, is the value of all your financial assets minus all your financial liabilities.
- In contrast to income or saving, which are flow variables, financial wealth is a stock variable(=voorraadgrootheid).
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What is investment and what financial investment?
- Investmentis a term economists reserve for the purchase of new capital goods, from machines to plants to office buildings.
- When you want to talk about the purchase of shares or other financial assets, you should refer them as a financial investment.
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