Which of the following is true about investment and saving?
A)Investment always exceeds saving in an economy.
B)Investment has the same meaning as saving.
C)Investment creates new productive capacity, whereas saving does not involve any spending on new capital.
D)Investment does not depend on the real interest rate, whereas saving does.

Question

Quizplus · Accepted Answer

Investment involves spending on new capital goods or projects to create new productive capacity, while saving is simply setting aside a portion of one's income for future use. Investment can lead to economic growth and higher future returns, while saving alone does not involve any spending on new capital. Therefore, option C is correct. Option A is false because investment can be less than saving if there are insufficient investment opportunities, and option B is incorrect because saving is only a portion of income, while investment involves spending that portion on new capital. Option D is incorrect because both saving and investment are influenced by the real interest rate.

Which of the Following Is True About Investment and Saving