Societies choose what share of thire resources to devote to consumption and what

Question

Societies choose what share of thire resources to devote to consumption and what share to devote to investment some of there decision involve private spending other involve goverment spending
a-describe some forms of private spending that represent consumption and some forms that represent investment. The national income accounts include tuition as apart of counsumer spending. In your opinioin are the resources you devote to your education a form of consumption or a form of investment?
b- describe some forms of government spending that represent investment. In your opininon should we view givernment spending on health programs as a form of consumption or investment? would you distinguish between health programes for the young and health programs for the elderly?

Explanation / Answer

a) Private spending is pretty much any time you go to the store to buy something. When you go buy lunch, or purchase textbooks for class, these are types of consumer spending. Investment on the other hand is when you give someone money in the hope that they will succeed in their venture and thus pay you (hopefully more than you invested) because of your investment. The stock market is an excellent example of this. You give a company money and hope that they use it to make the company better, thus increasing the value of your stock. College tuition could be considered investing in yourself since you are spending money in order to potentially increases the value of your labor. However, true investment would be if by giving money to your college you could hope to get a return on your money from them (they send you a check because they are doing well - this wouldn't happen). So it depends on what your definition of investment is. b) If you use the more lax definition of investment (which I think is more commonly used) then government spending on health reform is a type of investment. By paying for preventative medicine, they are saving themselves from people who are very sick and require expensive treatments. A healthy workforce is also more productive thus improving GDP and possibly average incomes. In this case, it would be wise to distinguish between programs for the young and elderly. Programs for the young are likely preventative medicine which will lead to fewer medical expenses in the long run. However, there is not much investment benefit to aiding the elderly. As a result, this is much more like a form of consumption (since you aren't really getting a return on the money that you spend on their health care). I hope this helps, please rate well.

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